Even as ITT shrinks, the boss' pay stays big Araskog's compensation remains in the millions: solace for Hilton intrusion


If Rand V. Araskog, the chairman and chief executive of ITT Corp., succeeds in splitting up his company for the second time in as many years, one thing will remain the same: his generous paycheck.

Even though Araskog will be presiding over an ever-smaller empire -- one of the five slices taken since 1995 -- his salary is escaping unscathed and his total compensation should remain quite ample.

ITT wants to break up again in apparent response to a hostile takeover attempt by the Hilton Hotels Corp. Under the plan, which was announced in July, ITT Destinations would take the hotel and casino operations, ITT would consist of ITT World Directories' telephone-book publishing activities, and ITT Educational Services would keep the technical-school business, now a majority-owned subsidiary of ITT. Araskog would head ITT Destinations.

Much to Hilton's dismay, this new split-up may be accomplished without a vote by ITT shareholders. Whether Araskog can go ahead with that plan is expected to be decided this week by U.S. District Judge Philip M. Pro in Nevada, who will be weighing the arguments in a suit brought by Hilton to block the restructuring.

Among those filing friend-of-the-court briefs are two pension heavyweights who hold ITT stock, the California Public Employees' Retirement System, or Calpers, and the College Retirement Equities Fund. ITT delayed its shareholder meeting from May to November, and some shareholders argue that they have not had enough say in the company's new look.

Once a huge conglomerate, ITT, the former International Telephone and Telegraph Corp., has certainly been amoeba-like under Araskog. With about $25 billion in revenues at the end of 1995, the company spun off its manufacturing businesses into ITT Industries and its insurance business into ITT Hartford.

The current ITT Corp., the piece Araskog held on to, had $6.6 billion in 1996 revenues, about $5.7 billion of that from the operations of the future ITT Destinations.

In his 18-year reign at ITT, Araskog has jettisoned other parts of ITT, including Rayonier, a forest products company.

But this shrinking empire has not meant a much smaller paycheck for Araskog. According to the preliminary proxy statement filed this month, ITT Destinations will pay him a base salary of $2 million -- the same as his current base salary at the ITT Corp. and the same as his base pay in 1995, when ITT was substantially larger.

Further, ITT Destinations has assumed Araskog's employment contract and will continue to pay him the $2 million a year -- plus bonus -- until October 2000, when he reaches 69.

Of course, Araskog makes much more than his salary; there are his bonus and assorted other stock awards, options and perks. When Crystal calculated the total value of his compensation package, it came to $8.6 million last year and $18.3 million in 1995.

The way ITT figures it, Araskog has rewarded investors with some $20 billion in value the last 18 years and was paid just 1 percent of that amount, or roughly $200 million, in compensation in that time.

Investors with all three pieces of the former ITT, he added, have easily outpaced the Standard & Poor's 500 stock index since the 1995 split. Still, ITT Corp.'s stock performance is nothing to brag about. Since Dec. 15, 1995, when the new ITT began trading, the shares have risen 24 percent, compared with a 53 percent gain for the S&P 500.

Pub Date: 9/27/97

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