Top-paid executives

SUN SPECIAL REPORT Constellation Energy Group well represented on local compensation list

August 17, 2008|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

Constellation Energy Group dominated the list of the most highly paid local executives in 2007, a year in which the company's stock price rose nearly 50 percent.

Leaders at the Baltimore Gas and Electric Co. parent accounted for four of the top 10 - and more than $40 million in compensation combined. Topping all other executives at publicly traded companies was Constellation Chief Executive Officer Mayo A. Shattuck III, who earned about $14 million last year in salary, stock awards, options and the like.

Baltimore money manager Legg Mason Inc.'s executives had less reason to celebrate. The company's stock price declined 40 percent in its last fiscal year - and so did Chairman Raymond A. "Chip" Mason's compensation.

Big corporations continue to be rewarding to run, even at a time of economic and stock volatility - Mason's $8.1 million pay was still enough to rank him seventh among the area's executives. But analysts say something new is afoot: After years of complaints from shareholders, politicians and unions, public companies nationwide are getting better at linking executive compensation to performance. Experts anticipate continued improvements, not the least because investors are having some success with "say on pay" votes that register their ire.

"Some of the major changes have happened to long-term incentives, and that takes a little longer to play out," said Paul Hodgson, senior research associate at the Corporate Library, a governance research firm. "So there's a lag time between change and effect."

The Sun pored through filings made by local public companies that detailed pay for CEOs and other high-ranking officials such as chief financial officers. According to that analysis:

* For executives who worked for their companies in both 2006 and 2007, the median change in pay was an 8 percent increase. That means half got more and half got less.

* Higher-paid executives tended to get smaller increases. For executives earning at least $1 million in 2006, the median change last year was a pay raise of 4 percent.

* Fifty executives - about 30 percent - saw their pay drop in 2007. But that includes some who quit partway into the year.

Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said it was typical for companies to try to keep up with the Joneses, a philosophy that drives compensation skyward. But investor anger has company boards thinking twice.

"Things are getting better," he said. "It's just going to take some time."

Some companies still increase executives' pay even though the stock is worth less, a practice Elson believes is hard to justify to shareholders.

Sinclair Broadcast Group Inc.'s share price dropped 22 percent last year, but CEO David D. Smith's compensation package nearly doubled, to about $2 million.

Under Armour founder and CEO Kevin Plank saw his compensation almost triple to $1.5 million as his company's stock price fell 13 percent.

Black & Decker Corp. CEO Nolan D. Archibald, whose $11.1 million compensation ranked him second in the metro area after Shattuck, enjoyed a 7 percent increase though the company's stock price fell 13 percent.

Sinclair, which declined to comment, also reported a 58 percent drop in profit last year.

Profit at Black & Decker, on the other hand, rose about as much as its CEO's pay. "His compensation is well down from what it was in 2003 to 2005," added Roger A. Young, a Black & Decker spokesman. "There is certainly a pay-for-performance mentality and system here."

Under Armour, which saw its profit rise 35 percent, says Plank's compensation was artificially low in 2006 because he turned down a $625,000 bonus that year. "He felt we could have done better, although we did very, very well," said Wayne A. Marino, Under Armour's chief operating officer.

It looks at first glance like Constellation CEO Shattuck saw his pay slump 30 percent last year - his 2006 figure was reported as $20 million in a Securities and Exchange Commission filing. But the company takes issue with the way the SEC requires corporations to count long-term incentives.

Constellation insists that Shattuck's actual compensation was about $14 million in 2006 and $14.8 million last year, which equates to a 6 percent raise. It said similar calculations applied to the other Constellation executives on the high-pay list.

Constellation's stock performance last year hasn't immunized the company from concerns about pay levels - and not just among BGE customers annoyed about the 50 percent increase in electric rates last year.

PROXY Governance Inc., a Vienna, Va.-based proxy advisory firm, recommended that shareholders withhold votes this year from directors on Constellation's compensation committee to protest "out of line" pay.

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