POLL: Did your income go up in 2011?
Most top executives of Chattanooga-area public companies earned more in 2011, and the businesses increasingly are asking shareholders to have a say on pay.
"Boards and compensation committees are becoming more cognizant that they've got to get their act together," said Paul R. Dorf, managing director of the New Jersey consulting firm Compensation Resources Inc.
The average pay of the top bosses of area companies that report compensation to the Securities and Exchange Commission rose 12.3 percent last year.
Among the nine local CEOs on the job through 2011, six got bigger pay packages and three took home less money last year.
The local CEO pay gains were more than four times the average 2.8 percent salary increase granted for all workers, according to the U.S. Bureau of Labor Statistics.
But the local CEOs, on average, still got only about half of the 20 percent gain in pay for the top 100 highest-paid chief executives, according to Equilar Inc., a California compensation research firm that compiled data for The New York Times.
That being said, of the area's publicly traded companies, in no case did company share prices increase in 2011 as much as CEO pay packages, figures show.
Compensation for CEOs is set by company boards based upon an assessment of company performance and the need to offer competitive packages to keep top talent.
Paul D. Lapides, who directs the Kennesaw State University Corporate Governance Center, said many CEOs gained in 2011 because they came out of the economic downturn with stock options worth a lot of money.
"It's a big payoff for CEOs and other senior executives," he said. "That's also true for the directors of the company."
Modest salary gains
Dorf said that from a strictly salary viewpoint, most CEOs weren't awarded big hikes.
"A major portion [of pay increases] consists of long-term incentive equity," he said. "Stock prices have gone up. It shows up in higher compensation."
Jim Sabourin, vice president of corporate communications at insurer and benefits provider Unum Group, said that if changes in pension calculations are taken into consideration, CEO Thomas R. Watjen's pay was $10.1 million in 2011 rather than $12.2 million as reported in the summary compensation table in SEC documents.
"That's the way the board looks at it," he said. Sabourin added that the Unum board takes into consideration a slate of factors in figuring CEO pay, including meeting targets in the difficult financial and economic environment and five-year shareholder returns at the insurer, which Sabourin said dramatically exceed the industry average.
Increasingly, shareholders of companies also want a voice in executive pay. Of the nine publicly held companies in the area, six are offering nonbinding, advisory say on pay votes at their annual meetings this year.
Lapides said that asking shareholders to vote on executive pay forces management and boards to have a dialogue with shareholders.
"Good management has conversations with shareholders," he said about the say on pay provision included in the 2010 Dodd-Frank financial reform act, adding he's still not sure the votes are "incredibly helpful."
Dorf said only about 10 percent of shareholder say on pay votes was "no."
Sabourin said Unum is in its second year of offering shareholders a vote on executive pay at the company's annual meeting.
"We have an interest in being transparent," he said.
J. Vincent Mish, chief financial officer at tow-truck maker Miller Industries, said it too is offering shareholders a say on pay vote for the second year as a way to garner feedback.
Miller CEO Jeffrey I. Badgley's salary increased from $320,925 in 2010 to $428,289 in 2011. Also in 2011, he received $194,210 in nonequity incentive plan compensation based on the company's performance.
"He has done a great job," said Mish.