From Chickamauga to St. Marys, many Georgians are still trying to shake the malaise stemming from the Great Recession, but 2010 was a great year for some of the state’s corporate captains.
Here’s one measure of just how good it was: $232.9 million.
That’s the total compensation that the chief executives at Georgia’s 25 most-valuable public companies took home last year, according to The Atlanta Journal-Constitution’s review of the annual disclosures required by the Securities and Exchange Commission. That’s enough loot — mostly in cash and company stock — to buy more than 2,300 metro Atlanta houses at average market value.
Here’s another measure of just how lucrative 2010 was: 29 percent. That’s the average pay raise the 25 executives saw last year.
Coca-Cola CEO Muhtar Kent had the highest compensation last year — $24,782,017, a 32 percent raise. NCR Corp. CEO William Nuti got the biggest raise: His total pay jumped 254 percent, to $12,170,898.
Finally, here’s one more measure: $680.5 million. That’s the total value of the so-called “golden parachutes” that the CEOs could walk away with if they lose their jobs in mergers. Coca-Cola Enterprises CEO John Brock’s parachute would be the largest — $94,573,513. Nine others’ potential payoffs top $30 million each.
Georgia’s companies are disclosing such eye-popping sums as many of their customers, employees and shareholders continue to struggle with shrinking job security and home values. And this year, for the first time at most companies, a lot of those shareholders are getting a chance to give executives’ pay a thumb’s up or down.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed last year, requires almost all public companies to give shareholders a so-called “say on pay” vote. Shareholders also get to decide whether such votes will occur every year or every two or three years.
So far at annual meetings across the nation, shareholders have approved the executive pay at all but a handful of firms. But they’ve also opted for yearly say-on-pay votes, even against the wishes of many companies that had early meetings, according to the Center on Executive Compensation. In response, most companies with later meetings recommended annual say-on-pay votes.
The trend has been the same locally.
The votes are non-binding, but critics hope they will pressure corporate directors to rein in pay and perks.
Even though companies can ignore the results, many have taken the say-on-pay votes seriously, said Richard V. Smith, senior vice president at Sibson Consulting, a New York compensation consulting firm.
“Getting a ‘no’ vote is not only poor optics. It’s humiliating,” he said.
To avoid potentially adverse votes, some companies have dropped certain perks, met with large institutional investors, and devoted more pages in their proxy statements to explaining their approach to executive pay.
Shareholders might opt to avoid firms that fail to win shareholders’ approval of their executive pay packages, Smith predicted. A couple of “no” votes could lead to management shake-ups, he added.
Indeed, in recent years, some companies have trimmed perks or executives have voluntarily given up a few. Delta Air Lines, for instance, eliminated — at least for more recently hired executives — tax gross-up payments that were used to pay income taxes on some perks.
Under pressure from Congress, the Securities and Exchange Commission and big investors, companies also have been disclosing CEO compensation and golden parachutes in ever more detail.
“I think it’s been a real eye-opener for investors,” said Brandon Rees, deputy director of the office of investment for the AFL-CIO, the national union group. He thinks most CEO pay is way too high, and companies aren’t doing enough to create jobs.
America’s corporations are sitting on $1.9 trillion of cash rather than investing in new products and hiring workers, said Rees.
“The money should either be put to work by the company or returned to investors,” he said. “We’ve got 14 million Americans who are unemployed.”
But proponents of the current executive pay structure say rising stock prices and company profits show that executive pay plans are working.
The connection between job growth and CEO pay “is not always linear,” said Tim Bartl, senior vice president of the Center on Executive Compensation. But CEOs are paid to make sure companies are profitable and healthy, which eventually leads to more hiring, he said.
“There is more than ever a linking of [CEO] pay with long-term interests of the company,” said Bartl, whose Washington, D.C., center is controlled by a lobbying group for human resources executives.
Such pay schemes aim to encourage CEOs to give their best to the job by paying bigger rewards when they exceed certain profit levels or other targets. Stock and option awards also are supposed to increase the CEO’s focus on the company’s value. They’re usually a larger part of CEO pay than cash compensation.
“We saw pay decline considerably” in 2008 and 2009 when the recession hit, said Bartl. Then CEO pay jumped last year after corporate profits and stock prices rebounded.
Nationwide, corporate profits surged 29 percent last year, to $1.37 trillion, according to the Federal Reserve. Likewise, stocks have roughly doubled in value since 2009 lows.
Rising stock prices swelled the value of stock and option awards from earlier years, as well as the value of potential golden parachutes.
The typical CEO paycheck at 300 of the nation’s largest companies increased about 24 percent, to $9 million, said Smith, at Sibson Consulting.
The nation’s highest-paid CEO was Viacom’s Philippe Dauman, who got $84.5 million.
After seeing a small decline in pay in 2009, 80 percent of the CEOs at Georgia’s 25 most valuable companies got pay hikes last year — often by 40 percent or more.
In the middle of the pack was Martin H. Richenhagen, CEO at AGCO Corp., who received $8,153,945, about half as a stock award. His pay went up 39 percent.
The Duluth farm equipment manufacturer’s profits jumped more than 60 percent last year and its stock rose by a similar percentage, but both were still below 2008 levels.
That dynamic of tying big pay raises to company profits and stock performances that are still below pre-recession levels galls some critics.
“When you look at stock performance, we’ve never had a worse decade” since the Great Depression, said Rees. After two crashes, the stock market is basically at the same level as a decade ago, “and yet we’ve never paid CEOs more money,” he said.
Executives profited handsomely when the company stock they had been awarded at depressed prices in 2008 and 2009 later bounced back after the financial crisis, he said.
For instance, Coca-Cola Enterprises CEO Brock was awarded $6.5 million worth of company stock and options at rock-bottom prices in 2008. A few weeks later, the stock was climbing again. By the end of last year, Brock’s 2008 award was worth $49.6 million.
Executives are “surfing the volatility,” said Rees. They’re benefiting from external events — the recovering economy and rising stock markets — that they shouldn’t take credit for, he said.
But proponents counter that ongoing efforts to link CEO pay to company performance are helping to eliminate windfalls.
Bartl said executives at many firms can lose part of their compensation if their company doesn’t meet specific profit goals.
“I think you’re going to see greater alignment going forward,” he said.
And it used to be that most executives only had to stay in the job three years or so before they became vested and the stock awards were theirs. But these days, about 70 percent of big companies now use so-called “performance vesting” for at least part of executives’ stock awards, said Bartl.
NCR CEO Nuti, for instance, forfeited $2.2 million of his stock awards in 2008 and $3.5 million in 2009 after the company didn’t meet certain profit measures.
Company officials say Nuti could forfeit up to $4 million of last year’s award, as well, if the company doesn’t do well in the future. So far, he’s on target to get the full $9.5 million award or even higher, which would result in a raise of more than 250 percent.
“We are a pay-for-performance company,” said Erin Farrell-Talbot, in charge of executive communications at NCR.
Nuti “transformed NCR for continued profitable growth,” she said, including leading the company’s move to metro Atlanta from Ohio.
“We’re doing fantastic.”
It pays to be in charge:
Your salary may not have gone up much last year — if it went up at all — but nearly all the CEOs at Georgia’s top companies got double-digit raises in 2010.
Muhtar Kent, Coca Cola Co.
$24,782,017+32%
John F. Brock, Coca Cola Enterprises
$22,849,054+47%
David M. Ratcliffe, Southern Co.
$16,029,754+48%
Daniel P. Amos, AFLAC
$15,955,183+17%
William Nuti, NCR Corp.
$12,170,898+254%
Mark D. Ketchum, Newell Rubbermaid
$11,904,601 +41%
Martin L. Flanagan, Invesco Ltd.
$11,508,402 +48%
D. Scott Davis, UPS
$10,726,019 +72%
James A. Rubright, Rock-Tenn Co.
$10,507,076 -5%
Francis S. Blake, Home Depot
$10,452,671 +5%
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