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New York Times, April 4, 2010 feature


Executive Pay: A Special Report

Bargain Rates for a C.E.O.?


The median pay package for C.E.O.’s at big public companies declined last year, to $7.7 million. Many critics would say that’s still overpaying.

Striking Gold in Stock Options

When a First Pick Isn’t the Best Pick

Calculating the Pay Figures

Interactive Interactive: The Pay at the Top

Executive Pay: A Special Report
Bargain Rates for a C.E.O.?

LAST year may have been unnerving for chief executives accustomed to all of the familiar ornaments of corporate life: eight-figure pay packages, corporate jets, memberships in select clubs, and on and on.

As the country settled into the worst recession in decades, the government became unusually involved in corporate pay practices. The Obama administration appointed Kenneth Feinberg — a k a the pay czar — to scrutinize compensation at corporate behemoths like Citigroup, the American International Group, Bank of America, General Motors and Chrysler, all of which taxpayers propped up with billions upon billions of dollars in bailouts.

Mr. Feinberg came up with his own blueprint for compensation boundaries — and noted that its strictures could be applied not only to corporate wards of the state under the Troubled Asset Relief Program but also in myriad other boardrooms.

So if you were the typical American C.E.O., you may have found some of the pay czar’s prescriptions startling. For instance, he thinks you should pay golf club dues out of your own pocket. He also would like you to take less of your pay in cash and more of it in stock. In fact, the White House set a limit on how much cash top executives of the biggest TARP companies could get as part of their annual compensation: $500,000 a year. That sum that may seem princely to the average American worker but, alas, doesn’t buy much for a crowd used to Fifth Avenue triplexes, third and fourth homes, top-drawer health care and lavish private schools for their children.

Mr. Feinberg’s proposed remedies weren’t the only compensation-related issues that might have disturbed an executive’s sleep. The Securities and Exchange Commission ordered companies to disclose more information about compensation, which invariably stirs up shareholders. And the Federal Reserve also announced its own sweeping review of banker pay.

On Capitol Hill, meanwhile, Democratic allies of the White House are mulling reforms that would require public companies to give shareholders an annual “say on pay” vote. While the measure, if enacted, would be nonbinding, it would still force C.E.O.’s to publicly debate at annual meetings all aspects of sumptuous pay packages.

In short, the long-running feud between shareholder advocates and corporations over executive pay will offer an emotional flashpoint as President Obama turns his attention from health care to financial reform.

Business representatives in Washington are pushing back. “We are not taking issue with the pay master’s approach to those companies that are still receiving TARP funds,” says John J. Castellani, president of the Business Roundtable, an association of chief executives whose board includes highly paid C.E.O.’s. “But to apply that to every public company, we think, is not advisable and out of bounds.”

Even so, shareholder advocates say they see some companies recrafting pay policies to please the government and to get in front of any coming changes.

“Boardrooms correctly read the pay czar’s action as a real signal to corporate America of public dismay over excessive pay,” says Stephen M. Davis, a senior fellow at the Millstein Center for Corporate Governance and Performance at Yale. “It was a warning that if they didn’t get their act together that further intervention by the government was perhaps inevitable.”

But it’s probably more accurate to say that companies are sending a mixed message about compensation: we will follow some of Washington’s pay recommendations, but not all of them. At least, that’s the trend in the data in this season’s raft of corporate proxy filings.

Equilar, a compensation research firm in Redwood Shores, Calif., recently prepared a report for The New York Times analyzing the pay of 200 chief executives at 199 public companies with revenue of at least $5.78 billion that filed their proxies by March 26. (Only 199 companies are on the list because Motorola has two co-C.E.O.’s.)

Equilar says the median pay package — the midpoint where half of the compensation packages on that list are lower and half are higher — declined by 13 percent last year, to $7.7 million. The average total pay tumbled by 15 percent, to $9.5 million.

It was the second consecutive year that C.E.O. pay slipped, sending the median compensation package back to about where it was in 2004 and shaving off much of the increase that occurred when the economy went into overdrive and executive pay soared along with it.

Two years ago, C.E.O. compensation dropped because cash bonuses were decimated by the financial crisis. The decline last year can be largely attributed to the hammering of stock and option awards granted early in 2009, when stock prices were at their nadir. As a result, Equilar says, the median values of C.E.O. stock and option awards were down by 19 percent and 28 percent.

Of course, some chief executives have seen the value of their equity grants soar along with the stock market. This angers some shareholder advocates who say that these C.E.O.’s did little to earn their paper wealth. Still, it may be years before executives are able to actually reap the proceeds of those grants, because of vesting requirements.

Mr. Feinberg has made it more than clear that he finds perks like private jets and private clubs to be particularly noxious — and companies have apparently read that memo. According to Equilar, companies collectively cut the median annual perk award by 19 percent, to $170,487. The average fell by 14 percent, to $261,801.

At the same time, companies in the Equilar survey were reluctant to increase the cash component of their compensation packages. Equilar says the median cash payout rose slightly, by 1 percent, to $3.1 million. The average fell by 5 percent, to $3.8 million. “We’ve seen some companies that switched over to cash because equity was too volatile,” says Aaron Boyd, the research manager of Equilar.

FOR all of these signs that a real reordering of executive compensation may be under way, some analysts wonder whether the Obama administration will abandon its pay crusade.

“We have a long history of episodes like this in depressions and recessions where everybody talks about reform,” says Kevin J. Murphy, a business professor at the University of Southern California. A few years go by, he says, and then you wonder, “What were those reforms again?”

Mr. Murphy says he’s not only skeptical that reforms will be enacted, he is also skeptical that they do any good at all.

But Mr. Feinberg cautions that companies banking on the public’s short attention span do so at their own peril. “There is a tremendous amount of populist outrage and frustration in this,” he warns.

Indeed, there have been fierce exchanges between activist investors and business supporters over a provision in both the House and Senate financial reform bills that could make it easier for shareholders to vote their own directors onto boards.

In February, conservative groups including the Christian Coalition warned Congress that the proposed measures would enable union operatives and animal-rights activists to win board seats.

Shareholder advocates, however, are hopeful that they will prevail. “It looks like the Democrats are holding firm on that,” says Mr. Davis of Yale. “If that’s traded away, there will be enormous disappointment in the investment community.”

IF ever a C.E.O. would have seemed impervious to the administration’s calls for pay reform, it is Lawrence J. Ellison of Oracle, the highest-paid chief executive in the Equilar survey. He made $85 million last year — more than the combined pay of the second- and third-ranked C.E.O.’s, J. Raymond Elliott of Boston Scientific, with $33 million, and Ray R. Irani of Occidental Petroleum, with $31 million. Mr. Ellison took all but $6 million of his pay in stock options.

A billionaire many times over, Mr. Ellison has never been afraid to flaunt his wealth. Yet he made a sacrificial gesture last year that is a sign of the times: this year he plans to decline his $1 million base salary and take just $1 instead. (Oracle declined to comment on Mr. Ellison’s pay.)

Few of the other top-10 C.E.O.’s on the Equilar list are apparently willing to make such concessions. Many of them saw the cash portion of their pay decrease as their bonuses shrank, thanks to the recession.

Mark V. Hurd of Hewlett-Packard, the fourth-highest-paid C.E.O. on the Equilar chart, made $24 million in 2009 — $18 million of which came in cash. William C. Weldon of Johnson & Johnson made $23 million — $15 million of it in cash. Robert A. Iger of Walt Disney made $22 million — $12 million in cash.

As usual, some C.E.O.’s in the Equilar survey seemed to have done more to earn their pay than others. For instance, Samuel J. Palmisano of I.B.M. made $21 million after he delivered a 9 percent net profit increase and helped oversee total shareholder returns of 58 percent. Jeffrey L. Bewkes of Time Warner made $19 million last year as he undid the disastrous AOL-Time Warner merger by spinning AOL off as a separate public company. Mr. Bewkes got $14 million of his pay in cash. He might wish he had received more Time Warner shares, though. The total return on his company’s stock was 21 percent in 2009.

There also was a crop of C.E.O.’s who relinquished their cash bonuses or took voluntary pay cuts because of a recession that devastated many customers, employees and shareholders.

Some of those who gave up their pay, however, didn’t seem to have any qualms about taking it later in the year after their boards had a change of heart.

Howard Schultz of Starbucks requested last year that his base salary be reduced from $1.19 million to $6,900 as “a personal contribution to cost-control efforts,” according to a company statement. However, the company later gave him a $1 million “discretionary bonus” that nearly made up for his sacrifice.

“Mr. Schultz’s performance greatly exceeded the board of directors’ expectations,” the company said in a statement.

At Hewlett-Packard, Mr. Hurd took a 20 percent salary cut early last year. But H.P. ended up giving him a $1.18 million discretionary bonus that restored the pay cut, a sum that also included extra cash the board approved to enhance Mr. Hurd’s regular bonus plan.

That left some analysts wondering whether H.P. had weakened the link between bonuses and performance.

“If they didn’t feel the incentive plans they had in place were rewarding this executive well enough, isn’t it about time they redesigned the bonus plan?” asked Paul Hodgson, senior research associate at the Corporate Library, a corporate governance research firm. “This is the third year in a row that H.P. gave its C.E.O. a discretionary bonus. Maybe it’s time for a new compensation committee.”

Gina Giamanco Tyler, an H.P. spokeswoman, said the company had “an effective pay-for-performance compensation model.”

U.S. Bancorp’s C.E.O., Richard K. Davis, who made $7 million last year, was also the beneficiary of corporate largess. He initially declined his $1 million cash bonus because of his company’s poor results in 2008, the “depressed level” of its stock price and “the general economic performance,” according to a U.S. Bancorp filing.

However, Mr. Davis would not go without the money for long. The bank’s board ended up reversing itself and paying him the bonus after all. Jennifer Wendt, a U.S. Bancorp spokeswoman, said that the directors thought he deserved the money because the bank had a good year and paid back its TARP aid.

AMONG the C.E.O.’s of TARP recipients last year, 12 are on the Equilar list, including Kenneth D. Lewis of Bank of America, Vikram S. Pandit of Citigroup, John G. Stumpf of Wells Fargo, Lloyd C. Blankfein of Goldman Sachs, Jamie L. Dimon of JPMorgan Chase and Kenneth I. Chenault of American Express.

According to Equilar, the median pay for this group was $6 million in 2009, a 34 percent decrease from 2008. The median stock and options portion of their pay plummeted 94 percent and 92 percent, respectively. But the median cash payout for the group rose 20 percent.

Mr. Lewis, who has stepped down, was the second-lowest-paid C.E.O. on the Equilar list, with $32,171 in cash. The only chief executive who made less was Steven P. Jobs of Apple, who collects a $1 salary and nothing more. (Mr. Jobs, of course, also owns more than a $1 billion worth of Apple stock.)

Mr. Pandit of Citigroup was the third-lowest-paid of the Equilar 200, at $128,751. He announced partway through the year that he would take just a $1 salary for the remainder of the year and no bonus until his bank returned to profitability, which it did not do in 2009. His pay last year was entirely in cash.

Mr. Blankfein, meanwhile, was the survey’s seventh-lowest-paid chief executive. He made $862,657 in cash, which includes $262,657 in perks for things like car expenses and financial counseling.

The highest-paid banker on the list, Mr. Stumpf of Wells Fargo, was paid nearly $19 million. He vaulted past his better-known peers last year by closely following the Obama administration’s compensation blueprint.

Last June, the Treasury Department appointed Mr. Feinberg and issued interim rules for compensation at TARP companies. It mandated a $500,000 salary cap for executives at the largest TARP recipients, saying any additional pay be awarded as long-term restricted stock.

Wells Fargo, which received TARP aid, layered $4.7 million worth of stock on top of Mr. Stumpf’s $900,000 cash base salary, bringing his total salary up to $5.6 million.

“If you want an almost perfect example of unintended consequences, this is it,” says Mr. Hodgson of the Corporate Library.

Wells awarded Mr. Stumpf an additional $13 million in stock, making his total compensation $19 million.

A Wells spokeswoman said Mr. Stumpf deserved his raise, in part because he now presided over a bank that was twice as big as it was the previous year after acquiring Wachovia. Wells repaid its TARP aid in December.

Goldman Sachs, which returned its TARP aid last summer, said late last year that it would pay a “vast majority” of its senior managers’ pay in stock that cannot be sold for five years. The bank can force employees to return pay if they engage in “materially improper risk analysis or failed sufficiently to raise concerns about risks” — a policy known as a clawback. Goldman also said it would have a nonbinding say-on-pay vote at its 2010 annual meeting.

Analysts say that other companies are making similar moves, though some more tepidly than others. Equilar says that the percentage of Fortune 100 firms that disclosed clawbacks last year rose to 73 percent from 64 percent. Some of the largest companies in the nation have also adopted similar say-on-pay provisions.

Few of these initiatives, however, go as far as those at Goldman. Equilar says that most clawbacks occur only if top executives engage in unethical conduct or misdeeds that result in financial misstatements. Some of these recently unveiled say-on-pay initiatives are also weaker than one would expect. Prudential, for example, allows say-on-pay votes only every other year. “We talked to a lot of our institutional investors and pension funds,” said a Prudential spokesman. “They said every year would be a lot of work for them. They said every other year would be adequate.”

Microsoft’s say-on-pay ballots are cast only once every three years. “Our compensation program is designed to induce and reward performance over a multiyear period,” Microsoft wrote online last year. “Say-on-pay votes should occur over similar timeframe.”

CHARLES M. ELSON, a corporate governance professor at the University of Delaware, says such limited measures are just window dressing corporations deploy to keep regulators from imposing tougher reforms. “I’ve always supported clawbacks, but they are almost impossible to enforce,” he says. “Unfortunately, I think say-on-pay is pointless.”

Both the House and the Senate financial reform bills could require public companies to have annual say-on-pay votes. The bills include a “proxy access” rule to make it easier for shareholders to get their own candidates elected to boards.

“We are looking at the first time across the American marketplace at an environment where shareholders will have real authority to hire and fire directors,” says Mr. Davis of Yale. “If companies ignore a vote on say-on-pay, a shareholder majority would have the right to remove the directors who failed to listen.”

Corporate America is dead set against this. The United States Chamber of Commerce says that proxy access would give extreme groups the ability to meddle in broad corporate decisions.

“This is something that isn’t about better corporate governance,” says Thomas Quaadman, the executive director of the chamber’s Center for Capital Markets Competitiveness. “This is about activists being put at the head of the line.”

Even if enhanced proxy access is eliminated from the bills, the Senate version also includes an amendment sponsored by Robert Menendez, Democrat of New Jersey, that would offer a revealing compensation barometer: a requirement that public companies disclose median wage for their workers along with their chief executive’s compensation.

Asked why he thought this was important, Mr. Menendez quoted the Supreme Court justice Louis D. Brandeis: “Sunlight is the best disinfectant.”

A version of this special report appeared in print on April 4, 2010, on page BU1 of the New York edition.

Striking Gold in Stock Options

WERE they smart, or just lucky?

Annie Marie Musselman for The New York Times

Alan Mulally


Annie Marie Musselman for The New York Times

A corporate comeback and great timing drove option gains of Howard Schultz, Starbucks' C.E.O.


As the stock market dived in late 2008 and early 2009, chief executives of the biggest American companies received their annual grants of stock and options, and the timing couldn’t have been better.

The subsequent rally has benefited nearly all investors, but for a select group of C.E.O.’s who were fortunate enough to get options, it has created a windfall. And while much of the attention has focused on the pay for executives at banks, a sector that enjoyed a back-from-the-dead performance last year, many of the biggest winners from options were C.E.O.’s at nonfinancial companies.

Some executives on the top rungs of corporate America, including Alan Mulally of Ford Motor, Howard Schultz of Starbucks and Andrew Liveris of Dow Chemical, have seen the value of their 2009 options packages double, triple and quadruple — and, in Mr. Mulally’s case, jump nearly 10 times in value, to more than $50 million.

In most cases, they can’t cash in now: options typically take three to four years to fully vest. But the gains have set off renewed criticism that C.E.O. compensation is out of control, especially in a year plagued by the recession and high unemployment.

“You’re going to see big numbers and people are going to squawk about it, as they should,” said Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “There was concern at the time about unjustified returns, and that’s what happened. They clearly took advantage of the timing.”

Not so fast, say other pay experts, who argue that the first quarter, and occasionally the fourth quarter, are typically the time when stock and option grants are made, regardless of how the stock market is performing.

“They had no way to know the market would begin to recover in March,” said Carol Bowie, head of the governance institute at the RiskMetrics Group, a financial analytics company. “The fact of the matter is that many, many companies grant awards at the beginning of the year. It turned out to be an opportune time, but it’s not necessarily untoward.”

Nevertheless, the outsize gains from stock and options last year are likely to fuel what’s already a fierce debate about executive pay levels.

What’s more, companies like Ford, Starbucks, Dow, Whirlpool and American Express were making deep job cuts even as they showered options on their chief executives.

“It reinforces the view that the rules of the game are rigged and that no matter what these guys do, they always come out ahead,” said Sarah Anderson, who tracks executive pay at the Institute for Policy Studies, a liberal research group in Washington. “In a time of national crisis, it wasn’t appropriate to be giving out boatloads of new stock options.”

For all the criticism of the options windfall, it’s worth noting that some pay experts have argued for years that chief executives should receive more options and stock, rather than cash, in order to link their pay to long-term corporate performance.

But in a twist, the options packages have proved incredibly lucrative in the short term. The gains, Mr. Elson said, weren’t based on corporate performance but simply reflect the broad market rebound.

AMONG 200 C.E.O.’s of companies tracked by Equilar, an executive compensation research firm that analyzed data for The New York Times, the biggest beneficiary of an options grant and subsequent stock market rally was Mr. Mulally at Ford.

On March 11, 2009, two days after the Dow Jones industrial average hit a 12-year low of 6,547, Mr. Mulally received options to buy five million shares of Ford at $1.96, which the company estimated would be worth just over $5 million, using a complicated formula to predict their eventual value. The company usually grants options in March.

A year later, the market is up more than 60 percent, but Ford shares are worth nearly 10 times what they were then, making Mr. Mulally’s options worth an estimated $53.3 million, according to Equilar. Mr. Mulally was eligible to receive the first batch on March 27 — worth more than $17 million — and is set to receive the rest within two years.

Defenders of Mr. Mulally argue that Ford was the only one of the Big Three automakers not to file for bankruptcy last year; it actually earned a profit for the full year. But critics say an award of that size is still inappropriate, especially given the huge job cuts at Ford over the last few years.

“The sector is going through hard times,” Ms. Anderson said. “For workers, it’s demoralizing to see that kind of money going into executives’ pockets when jobs are being cut.”

A spokesman for Ford, Mark Truby, said Mr. Mulally’s options award was based on Ford’s long-term performance. “The ultimate value of these options will depend on how Ford’s stock performs over the next two years,” he said. Mr. Mulally, he added, took a 30 percent cut in salary in 2009 and 2010, and did not receive a cash bonus for 2008 and 2009.

“The vast majority of his compensation is at risk and tied directly to the performance of the company and the stock,” Mr. Truby said.

A corporate comeback and great timing also drove gains of the second-biggest options winner among the executives in the survey: Mr. Schultz of Starbucks.

Mr. Schultz built his company into a nationwide brand and oversaw its explosive growth in the 1990s but stepped down as chief executive in 2000. In early 2008, he returned to the top amid flagging earnings and complaints that Starbucks had lost its way.

On Nov. 17, 2008, as Starbucks shares neared lows not seen since the beginning of the decade, he received options to buy 2.7 million shares at $8.64 as part of his 2009 compensation, in an award the company estimated would eventually be worth $12.4 million.

It was a painful period for the company — in early 2009, Starbucks announced it would cut thousands of jobs and close 300 stores — but the fortunes of the chain and Mr. Schultz have improved greatly since then. Thanks to more traffic in the stores and renewed earnings growth, shares of Starbucks have risen above $24 a share, making his options package worth $42.3 million.

It’s a venti-size gain, though he will have to wait four years for the options to fully vest. In a statement, the company defended the award.

“Mr. Schultz led the company in numerous initiatives that resulted in permanent improvements throughout the business,” Starbucks said. “Starbucks’ stock price has increased significantly to the benefit of all Starbucks shareholders.” The company also said the timing of Mr. Schultz’s award was set long before Starbucks’ shares reached new lows.

It wasn’t just the surging stock prices that created huge paydays for some executives. As share prices declined, said Mr. Elson of the Center for Corporate Governance, many companies pumped up the number of options they doled out to make up for any possible loss in value.

For example, James M. Cracchiolo, the C.E.O. of Ameriprise Financial, received an options package worth $9.1 million in 2009, nearly identical to the value of his options award in 2008. But instead of giving him options on 656,535 shares as it did in 2008, the board gave him options on more than a million shares last year. (The company’s stock had declined to $21.34 from $52.86.)

“Everything fell dramatically, but to make up for the fall, they loaded up in stock,” said Mr. Elson. “They ended up benefiting from the bear market.”

Indeed, the projected value of Mr. Cracchiolo’s 2009 options package has nearly tripled, and now totals more than $25 million. A spokesman for Ameriprise declined to comment.

Some options packages had a lower price tag than in past years, but the executives were still getting a raise: the number of shares soared, setting up outsize paydays. Although the estimated value of the options package awarded to Craig A. Dubow, the C.E.O. of Gannett, declined to $585,000 in 2009 from $817,800 in 2008, the number of underlying shares more than doubled, to 500,000 from 235,000.

It was a worthwhile trade-off. Like many media companies, Gannett has been hit by the recession and migration of ad dollars from newspapers to the Internet. But its stock has rallied from lows of last year after cost cuts aided profitability. With its shares trading at $16.70— up from $3.75 when the options were granted in February 2009 — Mr. Dubow’s options package is worth $6.5 million, more than 10 times the initial valuation.

For Richard K. Templeton, the C.E.O. of Texas Instruments, total compensation of $9.9 million in 2009 barely budged from his overall pay in 2008. But he, too, benefited from a big increase in the number of options doled out.

The estimated value of his 2009 options award — $3.6 million — was one-third more than the one in 2008, but the number of underlying shares jumped from 270,000 to 664,461. That package is now worth $6.4 million.

A spokeswoman for Texas Instruments responded that the increase in value came from a rise in the stock price, not simply more shares, and that all employees with options grants benefited from that, not just Mr. Templeton.

Unlike past market rallies, when technology and financial companies soared but industrial names languished, this one has had big winners among old-economy names like Dow Chemical and Whirlpool. And the bigger the stock bounce, the faster the value of the options appreciated.

For Mr. Liveris of Dow Chemical, that meant an options package that has jumped nearly eight times in value, to nearly $19 million from $2.4 million in February 2009. The options grant for Jeff M. Fettig of Whirlpool has risen in value to $16.8 million from $1.9 million.

These gains came on the heels of big job cuts, though, with Dow and Whirlpool each eliminating roughly 5,000 jobs in 2009. The companies declined to comment.

AMERICAN EXPRESS doled out another rich options package, even as it cut 4,000 jobs last year and got financial help from the government in the financial crisis. The 2009 options of its C.E.O., Kenneth I. Chenault, are now worth $29.9 million, up from $3.9 million when awarded in January 2009.

A spokeswoman for American Express declined to comment but cited its proxy, which notes that it was the single best performer last year among the Dow Jones industrials, delivering a 125 percent return to shareholders.

American Express was also among the first financial firms to repay the federal aid, the proxy said, with the Treasury winding up with a 26 percent gain.

Given the stock market’s rapid run-up since March 2009, it’s unlikely that future options awards will prove as lucrative as they were last year. But the options packages of 2009 will most likely be a gift that keeps on giving as they vest between now and 2013.

“C.E.O.’s are looking at big gains,” said Aaron Boyd, head of research at Equilar. “Even if stock prices stay level for the next couple of years, some of these executives are still going to get a large payout.”

A version of this special report appeared in print on April 4, 2010, on page BU1 of the New York edition.

Calculating the Pay Figures

TO measure the amounts that executives were paid last year, Sunday Business asked Equilar, an executive compensation research firm, to compile and analyze pay data from corporate filings.

The analysis is presented in the accompanying table.

The data includes information for 200 executives at 199 companies with annual revenue of at least $5.78 billion. To be included in the study, a company must be incorporated in the United States and have filed a preliminary or definitive proxy statement by March 26.

For each executive, total compensation is calculated as the sum of base salary, discretionary and performance-based cash bonuses, the grant-date value of stock and option awards, as well as other compensation, which typically includes benefits and perquisites.

Base salary, bonus payout and other compensation values are taken directly from the Summary Compensation table of each company’s proxy statement. Grant-date values for both service- and performance-based stock and option awards are taken from the Grants of Plan-Based Awards table for each company with a fiscal year-end before Dec. 31, 2009. For companies with a calendar fiscal year-end filing under new disclosure rules, stock and option award values are taken as disclosed in the Summary Compensation table.

Whenever grant-date values are not provided for option awards, Equilar values these grants using the widely accepted Black-Scholes method and the company’s own valuation assumptions.

Grant-date values represent the estimated value of new stock and option awards. Although companies disclose grant-date values for these awards, there is no guarantee that executives will actually realize these amounts. They may earn more or less, depending on the movement of stock prices.

Also, Equilar’s analysis reports equity awards in the fiscal year they were granted. In some cases, especially in the financial sector, companies grant equity awards at the beginning of each fiscal year based on performance in the previous fiscal year. As such, equity awards granted in a fiscal year should not necessarily be viewed as indicative of corporate performance in that same year.

Percentage change in pay for each executive is calculated by using compensation data from the previous fiscal year. This data is collected in the same way as described above. For companies filing under the new disclosure rules, prior-year compensation is taken as restated in the Summary Compensation table in the current year’s proxy filing. For some executives, especially recent hires or newly promoted C.E.O.’s, the change in pay is listed as “n/a.” Their compensation, however, is included in averages and medians for other columns.

The accumulated-wealth section of the analysis includes supplemental information on equity gains and retirement plans. Stock option gains represent the value realized when an executive exercises outstanding option awards. Stock award gains represent the market value of stock awards that vested during the year. These gains are usually based on equity awards granted in prior fiscal years.

Lump-sum pension balance values represent the accumulated value of an executive’s pension plan if it were to be paid out all at once. Deferred-compensation balance represents the year-end balance of an executive’s deferred compensation accounts

Following are definitions for the terms atop each column in the table:

Chief Executive’s

2009 Compensation

BASE SALARY Annual pay that does not depend on the company’s results.

CASH BONUS The sum of discretionary and performance-based cash payments made in addition to base salary.

PERKS/OTHER Miscellaneous pay, not linked to performance, that includes such disparate items as moving expenses, personal use of corporate aircraft, and the value of assorted other benefits, including contributions to 401(k) plans and company-paid premiums for supplemental life insurance.

CASH PAY The sum of the base salary, cash bonus and perks/other categories.

STOCK AWARDS The aggregate grant-date value of incentive plan or service-based stock and/or unit awards, as reported by the company. Incentive plan stock awards are earned for attaining predetermined goals. Service-based stock awards vest if the executive stays with the company for a set period of time.

OPTION AWARDS The aggregate grant-date value of incentive plan or service-based awards of stock options or stock appreciation rights, as reported by the company. Incentive plan option awards are earned for attaining predetermined goals. Service-based option awards vest if the executive stays with the company for a set period.

TOTAL COMPENSATION AMOUNT The sum of the cash pay, stock awards and option awards categories.

TOTAL COMPENSATION CHANGE The percentage change in total compensation from fiscal 2008 to fiscal 2009. This figure is calculated only for companies where the chief executive held the position for two full years. For executives who were not the C.E.O. for at least two years, change in pay is not calculated and an “n/a” symbol is used.


2009 Performance

(vs. 2008)

REVENUE The percentage change in company revenue from fiscal 2008 to fiscal 2009. The figures are not adjusted to reflect spin-offs or restatements. For most financial institutions, only interest income is taken into account.

NET INCOME The percentage change in the company’s net income from continuing operations, before accounting changes and extraordinary items, from fiscal 2008 to fiscal 2009. The figures are not adjusted to reflect spin-offs or restatements. The symbol ”-/+” designates companies that reported a loss in 2008 and showed a profit in 2009. The symbol ”+/-” indicates companies that posted a profit in 2008 but reported a loss in 2009. A company with losses in both years is designated as ”-/-.”

TOTAL RETURN The percentage change in shareholder value from the beginning to the end of fiscal 2009, assuming that dividends were reinvested.


Accumulated Wealth

STOCK OPTION GAINS The pretax gain received during fiscal 2009 by exercising vested options granted in previous years. This gain is the difference between the stock price on the date of exercise and the exercise price of the option. It does not take into account whether the executive sold the shares that were gained when the option was exercised.

STOCK AWARD GAINS The pretax gain received during fiscal 2009 from the vesting of previously granted stock awards. It does not take into account whether the executive sold the shares that were gained upon vesting.

TOTAL VALUE OF EQUITY HOLDINGS The value of shares owned plus the value of previously awarded options that have not yet been exercised. Both values are based on the stock price at the end of the company’s fiscal year.

LUMP-SUM PENSION The present value, at fiscal year-end, of an executive’s accumulated pension benefits.

DEFERRED COMP. BALANCE The aggregate value at the end of the fiscal year of the amount in an executive’s deferred compensation plans. In cases where deferred compensation is invested in company stock, amounts listed here may also be included in the total value of equity holdings.


Copyright 2010 The New York Times Company




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