Some CEOs 'live like kings' as companies falter, say critics seeking pay curbs

May 09, 1993|By Kim Clark | Kim Clark,Staff Writer

If he makes good on his promise to boost Black & Decker Corp.'s stock price, Chief Executive Officer Nolan D. Archibald will have earned more each day in 1992 than the average Marylander earned all year.

That's one of many surprises revealed in new proxy statements, which for the first time require companies to tell stockholders exactly how much top executives are paid -- and how well the company's stock performed. And that information is fueling a growing debate: Are the executives worth the millions they receive?

In a survey of the 20 biggest public companies in Maryland that have released 1992 financial information under new reporting rules, The Sun found that the top executives' total compensation ranged from an estimated $8.7 million for Mr. Archibald to $427,000 for Waverly Inc. Chairman William Passano.

The average CEO in the group earned $1.6 million in 1992, slightly more than the national average, according to a survey of 350 CEOs by the Wall Street Journal, and 64 1/2 times the salary of the average Marylander.

That is reasonable, executives, directors and many compensation consultants say, noting that bonuses were tied to profits and other performance criteria.

For example, stock options, which made up about 83 percent of the value of Mr. Archibald's compensation package, will be worth nothing if the stock price doesn't rise.

(The estimated $7.2 million value of Mr. Archibald's options was derived using a standard formula for pricing options, which are ,, the right to buy stock in the future at a predetermined price.)

But a growing number of critics charge that CEO compensation has become too lavish in recent years, even as workers have been laid off and profits have suffered.

Some investors are trying to cap, or cut, executives' pay. And, because of one angry Silver Spring investor, Harry Katz, some of thefirst battles over paychecks will be fought in the annual meetings of Maryland companies such as GEICO Corp., MNC Financial Inc. and Marriott Corp.

Mr. Katz, a retired U.S. Patent Office attorney, doubts that a company president's job is tougher than the job of U.S. president, so he wants to cap CEO compensation at $300,000 -- 150 percent of President Clinton's salary.

"They've lived like kings," says Mr. Katz, whose proposal will be voted on at annual meetings of several local companies. Given the poor economy, the executives "should be glad to have a job for $300,000."

Key to the battle between executives and angry investors are documents mandated last year by the Securities and Exchange Commission.

In 1992 proxies, which are like ballots for stockholders, companies must specify not only how much they pay executives, but also how they structure that compensation -- including salaries, bonuses, stock options and perquisites such as country club memberships. And the charts must be accompanied by a graph comparing the company's stock performance with that of competitors and a broad market index.

That information should provide ammunition for both sides in the battle over executive pay. Critics can note that there seems to be little correlation between pay and either company size or profitability. Meanwhile, some local companies can note that their executives were paid far less than average while returning better-than-average profits.

For example, Black & Decker paid Mr. Archibald $1.4 million in salary, bonus and perquisites on top of an estimated $7.2 million worth of options to buy company stock in the next decade. But last year the company reported a $333.6 million loss (including $237 million for accounting changes). And, although the company was profitable before taxes, accounting changes and interest for the company's 1989 takeover of the Emhart Corp. were taken out, Black & Decker's operating earnings of $417 million were 12 percent lower than in 1991.

Nor have Black & Decker stockholders fared well. In the past five years, the stock has returned a total of only 7.5 percent, counting reinvested dividends and stock appreciation.

The company points out that the board hasn't given Mr. Archibald a raise in three years and won't grant him any more stock options through 1996. And the large option grant ties compensation to his ability to boost profits.

Though some executives such as Mr. Archibald received millions even though their companies struggled, other local executives VTC got comparatively small paychecks despite above-average financial performances.

For example, at Waverly, a Baltimore-based medical publisher, Mr. Passano got the lowest paycheck of the group examined, $427,000, even though Waverly stock was among the top local performers, as its price rose about 50 percent in 1992. (Because of accounting rule changes, the company reported a net loss last year.)

Nor is Mr. Passano's compensation related to his company's size -- he oversees more employees than other, higher-paid Maryland executives.

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