Maryland chief executives who produced big payoffs for their companies reaped the largest rewards last year.
Four of the 10 highest-paid officers had successfully guided their companies through major restructurings or made solid gains in a turnaround. And four others helped their firms to record profits.
Nineteen CEOs in the state earned more than $1 million in total compensation, and 11 made $2 million or more during their latest fiscal year, a review of 95 public companies in Maryland shows.
The information was compiled from company documents filed with the Securities and Exchange Commission. Total compensation includes base salary, bonus, restricted stock grants, gains from exercising stock options and other benefits -- such as insurance, pensions and company cars.
The highest-paid chief executive officer was Stephen F. Bollenbach of Bethesda hotel real estate firm Host Marriott Corp., who earned $7.5 million. Mr. Bollenbach hatched the successful plan to split the Marriott hotel empire into two companies, which helped propel the combined value of the stock.
Norman P. Blake Jr., the turnaround artist who led Baltimore insurer USF&G Corp. back to strong profit growth, followed with $4.5 million.
Skyrocketing profits also helped George T. Jochum of Rockville-based managed care provider Mid Atlantic Medical Services Inc. earn $3.7 million. Others whose companies achieved record profits included A. B. Krongard of Baltimore brokerage Alex. Brown Inc., $3.4 million; Robert N. Elkins of Owings Mills medical services company Integrated Health Services Inc., $3.2 million; and Raymond A. Mason of Baltimore brokerage Legg Mason Inc., $2.1 million.
Pay for these chief executive officers reflects a national trend that began a decade ago amid growing shareholder criticism that executives too often received huge pay packages, voted on by rubber-stamp boards, even when the company's performance and the payoff to shareholders was poor, according to executive compensation experts.
Linking pay with performance "makes sense," said Donald C. Hambrick, a professor of management at Columbia Business School in New York. "These are situations where often a single executive can make a great amount of difference. But he only gets the big payoff if the whole thing works."
But critics say compensation for top executives has increased far faster than inflation and pay in the rest of the work force. They maintain performance-related payments are awarded on top of large salaries rather than as substitutes for them, so the payments have little value in pushing CEOs to get results.
Graef Crystal, a professor at the University of California at Berkeley and the editor of executive pay newsletter The Crystal Report, said executive compensation is rarely proportionate with the contributions CEOs make. When the company is doing poorly, pay increases only slow down a little, but when they do well the CEOs grab all they can, he said.
"You could call it, 'Loot while the board is happy,' " Mr. Crystal said. "Pay for performance in America is a joke."
Still, performance was essential for several of Maryland's top money-earners, who faced one of the toughest assignments in business: radically altering the way a company operates.
Michael A. Conte, director of the regional economic studies program at the University of Baltimore, said that these CEOs are part of a generation of CEOs that is willing to try much more radical strategies in search of performance.
"In much [of Maryland], the old guard has turned over. The old boys that had very fat arrangements that were secure are gone, and the new regime has a great deal more [performance-related] pay. That's reflective of a national phenomena as well," Mr. Conte said.
"Nationally, the top companies are the fast-moving ones where pay for managers and even nonmanagers is no longer regarded as something to enable you to live as it is something to motivate you to perform well."
Mastermind of plan
Mr. Bollenbach, for instance, masterminded the plan that last October split the Marriott hotel empire into two companies: Host Marriott Corp., the hotel real estate company, which carries a majority of the original firm's debt, and Marriott International Corp., which handles hotel management and institutional food service only.
In the process Mr. Bollenbach helped Marriott's stock price move from around $17 a share in the fall of 1992, before the split was announced, to a combined value of about $37 a share.
Mr. Bollenbach's base salary was relatively modest by CEO standards -- $473,000. The majority of his income came from a restricted stock grant worth $6.6 million. Restricted stock are shares given to an executive, typically free of charge, but with the provision that he must stay with the company several years and possibly meet performance goals years before selling it for a gain.