July 08, 2007|By Laura Smitherman | Laura Smitherman,sun reporter
Lockheed Martin Corp.'s CEO Robert J. Stevens has had a lucrative career at the nation's largest defense contractor, and his pay has been outlined to shareholders for years.
But investors didn't know how lucrative his retirement could be. The Bethesda-based company has disclosed for the first time that in addition to $5.2 million in salary and bonus, plus stock awards and perks last year, Stevens also accrued more than $2 million in three pension plans, two 401(k) plans and a tax-advantaged plan mostly used by the corporate elite.
Companies such as Lockheed Martin are revealing more about the pay and perks conferred on the nation's chief executive officers than ever before. This year, public companies must follow new regulations aimed at shedding a brighter light on the executive pay that some shareholders and activists say has grown unchecked for years. Activists also point out that rank-and-file workers haven't seen proportionate benefits.
"It's fairly amazing, some of the amounts we're seeing, particularly in pensions," said Paul Hodgson, an analyst at the Corporate Library, a governance watchdog group. "If you make millions of dollars a year, you should have been able to save enough money or amass enough stock to get through retirement."
Stevens, whose pay package totaled $18.6 million, ranked among the highest-paid CEOs in Maryland last year, according to a survey by Salary.com of companies with headquarters here. Others included Constellation Energy Group Inc.'s Mayo A. Shattuck III, whose compensation package was worth $20 million, and Legg Mason Inc.'s Raymond A. "Chip" Mason, whose package was valued at $13.7 million.
Overall, 52 Maryland CEOs made more than $1 million last year, according to the salary survey commissioned by The Sun. The survey was based on data obtained from proxy statements and other public filings.
Among the figures revealed in this year's pay reports:
Retirement benefits, sometimes exceeding annual salaries, that were not fully reported or were difficult to quantify in the past.
Multimillion-dollar exit packages, which are often paid even when an executive is fired for poor performance. Such "golden good-byes" had been disclosed previously in employment contracts. But the value of the potential payouts was typically difficult to calculate.
For example, Silver Spring-based Choice Hotels International Inc. CEO Charles A. Ledsinger Jr. could receive an exit package worth $14.3 million if he were fired, according to public documents. He could collect his salary and bonus, use the company aircraft and expense his country-club dues until December 2009.
Perks that are worth a total of more than $10,000, including corporate jet rides for personal use and home security systems. Before, companies had to disclose only perks worth more than $50,000 and in far less detail.
Among the companies providing the most perks to CEOs in Maryland is Towson-based Black & Decker Corp. The company reported that Chairman and CEO Nolan D. Archibald received 2006 perks including a car and driver for business travel worth $68,553 and personal travel on company planes worth $437,317.
The reports also contain more detailed explanations for how boards of directors determine annual bonuses and other performance-based awards, as required under the new regulations. Investors have groused that directors too often rubber-stamp management recommendations, or set perimeters that inflate pay.
Officials with the Securities and Exchange Commission, the federal agency that crafted the regulations, say that investors are getting a better picture of CEO pay. But regulators have criticized some companies for loading up reports with legalese and boilerplate language, rather than using the "plain English" called for by the rules.
Shareholder advocates complain that some reports are simply too long for the average investor to easily digest. The report from Lockheed Martin is 32 pages. Constellation, which owns the Baltimore Gas and Electric Co. utility, took 28 pages to explain its pay program, and Baltimore's Legg Mason, one of the world's largest money managers, took 18.
Companies contend that the new disclosures can distort executive compensation because what is counted as pay isn't actually in an executive's paycheck.
Perhaps the most controversial is the total compensation figure. It's a calculation dictated by the SEC, which wanted to give shareholders one headline number encompassing the various ways CEOs are rewarded.
Companies complain that the total includes pension earnings that aren't touched as well as stock options that weren't necessarily cashed out. Instead, the total includes the options that the company expensed that year -- an accounting measure that differs from what the company actually granted the executive.
