C-Level Executive Compensation Turns Slippery

Total compensation for chief executives and other C-level executives from San Fernando Valley region public companies was mixed last year, despite the strong stock market and increases in base salary. Among the 25 companies in the region that paid their top manager the most, there were 10 chief executives who saw their total company compensation go down last year. For non-CEOs, there were 11 who had decreases in their compensation. This is despite the findings of the Wall Street Journal, in an analysis of 133 of the largest U.S. companies, that the median pay for chief executives hit an all-time high last year of $11.6 million, compared to the $11.2 million in 2016. Retaining his position at the top of the Business Journal’s list of Executive Compensation (see page 12) was Robert Iger, chief executive of Burbank entertainment and media giant Walt Disney Co. He saw his total company compensation decrease by 17 percent to $36.3 million. For non-chief executives, the top earner was Tutor Perini Corp.’s Chief Financial Officer Gary Smalley, who took home nearly $1.2 million (see page 14). Historically, executive compensation has grown during good times and declined during slowdowns. According to figures compiled by the Economic Policy Institute (see graph), chief executive compensation grew in the 1980s and 1990s and peaked in 2000 at about $20 million. The economic downturn that followed and then again during the Great Recession occasioned drops in chief executive pay. “After 2009 CEO compensation (measured using options realized) resumed an upward trajectory, peaking in 2014,” said a report from the institute published in 2016. Sources of income For executives on these lists, compensation is made up of salary, bonuses, stock and option awards, among other measurements. Najeeb Ghauri, chief executive of NetSol Technologies Inc., a Calabasas software developer for the vehicle and equipment leasing markets, (No. 21) led the increases with a spike of 159 percent to $1.6 million last year. While Ghauri’s salary went up a little more than $100,000 compared to 2016, he brought in a $200,000 bonus and a stock award of $500,000 that he had not received in the previous year. The highest decrease was for Isaac Ciechanover, chief executive of Atara Biotherapeutics Inc., (No. 15) whose total compensation went down by 66 percent, due primarily to a drop in stock awards to $2.5 million from $9.1 million in 2016. Rounding out the top five chief executives were Robert Bradway of Amgen Inc. in Thousand Oaks; Ronald Tutor, of Tutor Perini in Sylmar; Michael Warren, chief executive of Airborne Wireless Network; and Ronald Havner of Public Storage in Glendale. Warren, and other top management at Airborne Wireless – a Simi Valley company that is developing a broadband network using commercial aircraft – were new to the lists this year. J. Edward Daniels, president and treasurer at Airborne Wireless, placed second on the non-CEO list with a total compensation package of $9.5 million. Tutor Perini’s Smalley saw his total compensation increase more than 500 percent from 2016. This was due to a significant boost in his stock and options awards, part of the employment agreement to retain his services, according to the company’s proxy statement. Larry Comp, an executive compensation consultant with LTC Performance Strategies Inc. in Valencia, said that the actions taken by Tutor Perini to make sure Smalley stays was indicative of the high demand for good C-level executives. “There is a real focus on getting the best executive talent,” said Comp. “There is a realization that the difference between an exceptional executive and a very good executive is still pretty big.” While Comp and other experts on executive compensation agree that performance and pay go together for chief executives and others, just how that performance is defined is beginning to change. New policies Ed Montoya, co-leader of the financial officer practice in the San Francisco office of global executive search firm Calibre One, said that it is no longer enough for a top executive to guide a company with increases in share price. “It is about board diversity and executive diversity,” Montoya said. “It’s about keeping the headlines positive and not having any of the other issues that have been all over the press around culture and behaviors.” Comp said he is finding that companies are focused more on a holistic set of performance measures. While revenue growth and profitability remain important, there are other measurements coming into play, including customer satisfaction, retention of customers, process improvement and product development. “If you are continuing to focus on improving the customer experience and improving the product and processes, all things being equal, the numbers should improve,” Comp said. One area where there was no improvement on the chief executive list was in the number of women included on it. This year, there was only one – Wendy Simpson (No. 14), the head of LTC Properties Inc., a Westlake Village real estate investment trust that primarily invests in senior housing and health care properties. Last year’s list included five women chief executives. Falling off were Julia Stewart, who stepped down as head of restaurant chain operator Dine Brands Global Inc. in March; and Bethany Mayer, who left as chief of Ixia following its acquisition by Keysight Technologies Inc. Stewart, however, did make it on to the non-CEO list at No. 10 and was joined by four other women, with Christine McCarthy, senior executive vice president and chief financial officer at Disney, the highest at No. 4, a drop by one spot due to a 12 percent decrease in her total compensation. For Scott Fletcher, partner in the San Francisco office of financial industry executive search firm Jamesbeck Global Partners, the gender pay gap is something that he is talking about a lot with clients. While the issue is not a new one and has been discussed for decades, it is becoming harder for those at the top of the executive chain to say they are unaware of it, Fletcher said. “People are now focusing on it and hopefully making it right, if not better,” he added.