Georgia CEOs did rather well in the pay department last year, getting their best raises in at least five years even though their companies’ profit growth was anemic overall.
The median raise was 10.6 percent last year, to median compensation of just under $10 million, for chief executives at Georgia’s 30 largest public companies analyzed by The Atlanta Journal-Constitution.
Two-thirds of the CEOs got raises last year, according to the AJC’s examination of disclosures filed with the U.S. Securities and Exchange Commission.
Georgia's highest-paid CEO in 2016, FleetCor Technologies' Ronald Clarke, 61, also got one of the biggest raises — more than $19 million — even though the little-known payment card company he heads is one of the smallest companies in the AJC's examination. Critics said Clarke's $29.4 million pay package was excessive and poorly explained, and shareholders gave it a thumb's down at the Peachtree Corners company's annual shareholder meeting in June.
Their vote was non-binding, however.
Last year’s generous raises are something of a reversal from recent years.
CEOs in Georgia and across the nation typically had been getting raises smaller than 5 percent. Cuts were common, as the companies contended with profit headwinds, and as shareholders pushed back against record CEO pay after the Great Recession.
Researchers at the University of Georgia and Federal Reserve recently found that so-called "say on pay" shareholder votes on executive pay — though only advisory — have been a key factor in slowing CEO pay raises and in boosting companies' market values. The votes are a legacy of the Obama-era Dodd-Frank financial reform law.
Last year’s bigger pay packages might suggest a change in the wind. After all, the economy is perking up, the stock market has been rising, and there’s a new “national CEO” in town, as President Donald Trump likes to think of himself.
As a group, the 30 Georgia companies had an average stock return of 13.5 percent last year, thanks partly to the post-election “Trump bump” in the market, as investors bet that Trump’s policies will bring lower corporate taxes and lighter regulatory scrutiny. Yet median profit growth at the 30 firms was only 2.8 percent last year.
The trends were similar nationally: median CEO pay jumped 6.1 percent to $11 million last year at the 500 largest companies by revenue — the largest increase since 2013, according to Equilar, an executive compensation data firm. Likewise, companies in the S&P 500 (which ranks firms by stock market value) had a total shareholder return of 12.3 percent last year, including dividends.
Last year “was a pretty good year” for stocks, said Joe Mallin, an Atlanta partner at executive pay consulting firm Pay Governance. Rising stock values and a stronger economy will help CEOs hit their goals, said Mallin, helping them get bigger bonuses and bigger pay-outs from their long-term stock-based awards, which vest over time and account for the bulk of their pay.
“That’s where the real money is,” he said.
Pre-Trump targets
But he added that Trump’s election had nothing to do with rising pay last year, and probably won’t influence pay decisions this year. Most CEOs’ 2016 pay targets were set long before Trump was elected, said Mallin.
He has seen no evidence, he added, that corporate boards have become more generous this year or changed their thinking on how to encourage and reward CEOs for good performance.
“Boards have become very oriented toward performance and changes in performance,” said Mallin. “When performance is very good they tend to reward very well,” he said, and less so when the opposite is true.
But President Trump has drawn a bead on Dodd-Frank financial regulations, which could loosen restraints on executive pay, said Ugur Lel, a University of Georgia finance professor and co-author of the recent say-on-pay study.
“The Dodd-Frank regulations may be revised under the new administration,” said Lel in an email. If say-on-pay rules are watered down, that “will negatively affect the ability of institutional investors to influence executive pay policies to the extent those rules are changed.”
But Mallin cites another factor that may have boosted top executives’ 2016 pay, at least on paper. The SEC requires companies to report increases in the value of top executives’ pension benefits as part of pay. The value tends to rise when interest rates fall, as they have for several years, at least until recently.
For instance, about half of former Coca-Cola CEO Muhtar Kent’s 20 percent compensation boost last year, to $17.6 million, came from the $1.5 million increase in the value of his pension. Several other local CEOs saw similar pension increases.
Mallin said the rising pension values are mostly an accounting thing, rather than a real increase in benefits. The supplemental executive pension plans also are slowly disappearing. “Very few are being created anymore,” he said.
Look out below
But many of those same companies also have been cutting costs for their rank-and file employees’ pensions, including Coca-Cola, Aflac, AGCO, Genuine Parts, NCR Corp. and SunTrust. They’ve eliminated pensions for new employees, frozen benefits for veteran employees, switched to cheaper plans, or used some combination of those moves.
CEO pay raises could be smaller this year because interest rates are rising again, Mallin added. The Federal Reserve boosted its benchmark interest rates this month for the fourth time since the end of 2015, and more increases are expected that would influence most other interest rates, including those used to value executive pensions.
That means fewer or smaller increases in CEO pension values will show up in next year’s pay disclosures, said Mallin.
The 2016 results for the 30 companies also include some one-time pay increases tied to the hiring, promotion or departure of some CEOs.
Delta Air Lines CEO Ed Bastion’s pay jumped almost 40 percent, to $12.6 million, after he was promoted last year from president. Likewise, it looked like BMC Stock Holdings’ Peter Alexander got a big raise in 2016, to $4.8 million, after he became chief executive of the metro Atlanta building supply company late in 2015. He received only a small fraction of his annual pay in 2015.
On the other hand, former PulteHomes CEO Richard Dugas Jr.’s pay showed a big jump when he agreed to retire as CEO last year after coming under fire from the company’s founder. PulteGroup’s retirement agreement with Dugas, 52, allowed him to keep certain stock awards he otherwise would have had to forfeit upon his early retirement. Under SEC rules, the change increased his 2016 reported pay by more than $8.9 million.
In a filing, PulteHomes said it was “in effect, double-counting” part of Dugas’ stock award last year.
Others got a big raise, no matter how you count it.
NCR Corp.’s Bill Nuti got a 61 percent raise, to more than $19 million. Aflac CEO Dan Amos got more than $20 million after a 70 percent raise.
One of the largest raises last year went to FleetCor’s CEO, despite the firm’s small size, criticism of its pay practices and shareholder opposition.
FleetCor, which provides fuel payment cards for trucking companies and other fleet operators, barely made it on Fortune’s list of the 1,000 biggest U.S.-based companies by revenue, ranking 988.
(The AJC analyzed Georgia companies on the Fortune 1000 list, plus money manager Invesco Ltd., an S&P 500 company headquartered in Atlanta which doesn’t show up on the Fortune 1000 list because it has a Bermuda legal home.)
Shares stalled
FleetCor has grown spectacularly during Clarke’s nearly 17-year tenure as CEO, but not lately. FleetCor’s shares have been stalled for more than two years, and profit growth has slowed.
The company didn’t respond to requests for comment.
Critics called Clarke’s pay excessive and faulted the company’s rationale for the pay.
When the company fell short of meeting its profit goals, the company re-calculated the goals in a way that added $7 million to Clarke’s pay, said Dana Wise, deputy director of CtW Investment Group, which advises union pension funds of such issues.
“They moved the goal posts,” said Wise. “That’s kind of a heads I win, tails you lose situation for shareholders.”
ISS, which advises big investors on pay and governance issues, said Clarke’s 2016 compensation really totaled about $35.8 million, and recommended shareholders vote against the company’s executive pay policies.
They did, rejecting FleetCor’s executive pay plan last month for the second time since 2014. They also voted to have the say-on-pay votes annually, instead of every three years, as FleetCor recommended.
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Georgia CEO pay in 2016
Georgia CEOs saw their biggest raises in years in 2016, with median pay rising more than 10 percent, to almost $10 million. This table shows CEO pay for Georgia’s 30 largest companies and their percentage change from 2015.
Executive, Company, 2016 Compensation, Change from 2015
Ronald F. Clarke, FleetCor Technologies, $29,378,063, 189%
Daniel P. Amos, Aflac, $20,412,010, 70%
William Nuti, NCR Corp., $19,190,267, 61%
Muhtar Kent, Coca-Cola, $17,551,944, 20%
Richard J. Dugas, Jr., PulteGroup, $16,738,730, 111%
Martin H. Richenhagen, AGCO Corp., $16,600,543, 19%
Thomas A. Fanning, Southern Company, $15,829,652, 34%
Vernon J. Nagel, Acuity Brands, $15,275,516, 3%
Richard F. Smith, Equifax, $14,964,563, 16%
Martin L. Flanagan, Invesco, $14,607,055, -8%
Frank J. Bisignano, First Data, $13,835,173, -73%
David P. Abney, United Parcel Service, $13,724,572, 22%
Edward H. Bastian, Delta Air Lines, $12,557,231, 39%
Craig A. Menear, Home Depot, $11,471,601, -1%
Jeffrey C. Sprecher, ICE*, $10,730,399, -1%
Thomas C. Gallagher, Genuine Parts, $9,225,845, 49%
Mary A. Laschinger, Veritiv Corp., $8,303,346, -6%
Jeffrey S. Sloan, Global Payments, $8,237,403, -19%
William H. Rogers, Jr., SunTrust Banks, $8,173,407, 3%
Jeffrey S. Lorberbaum, Mohawk Industries, $7,071,423, 16%
Michael D. Casey, Carter’s, $6,976,839, 6%
John W. Robinson III, Aaron’s, $6,687,206, -4%
M. Troy Woods, Total System Services, $6,399,292, 3%
Michael P. Doss, Graphic Packaging, $5,390,341, 44%
Joseph J. DeAngelo, HD Supply, $5,305,241, -17%
Craig T. Monaghan, Asbury Automotive Group, $4,926,223, 3%
Allan P. Merrill, Beazer Homes, $4,881,311, -1%
Peter C. Alexander, BMC Stock Holdings, $4,753,535, NM
Mitchell B. Lewis, BlueLinx Holdings, $2,669,788, 130%
G. Michael Callahan Jr., GMS Inc., $1,662,892, -3%
Median pay, $9,978,122, 10.6%
* Intercontinental Exchange
Source: Company filings to Securities and Exchange Commission, AJC staff calculations
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