Corporate executives still getting big bucks
By Michael Liedtke
Associated Press
SAN FRANCISCO — The fallout from a dreary economy, corporate scandals and three straight years of stock market losses hasn't put much of a dent in executive paychecks.
Most of the nation's top executives continued to collect lucrative compensation packages during 2002, angering critics who believe the rewards reflect an insensitivity to the financial duress facing much of the country.
"Times are tough, but executives are still living like we're in the Roaring Twenties. It's mind-boggling," said Brandon Rees, research analyst for the AFL-CIO, which is lobbying for compensation reform.
By some estimates, investors have lost $7 trillion on paper since the stock market peaked in March 2000. Meanwhile, the U.S. unemployment rate rose from 4.7 percent in 2001 to 5.8 percent in 2002, swelling the jobless ranks by another 1.6 million people.
The setbacks haven't significantly changed the overall pay of chief executive officers, although corporate boards have said they want compensation packages to parallel the ups and downs of the stock market.
The mid-range CEO salary and bonus rose to $1.8 million in 2002, a 10 percent improvement from 2001, according to a Mercer Human Resource Consulting survey of executive compensation at 350 large publicly held companies.
"The goose that has been laying all those golden eggs still hasn't been butchered," said Bruce Ellig, author of "The Complete Guide to Executive Compensation."
News about big paychecks has come out over the past month as publicly held companies submitted annually required reports on executive compensation.
Some signs of restraint emerged among a few companies that refused to pay executives bonuses amid the economic misery. Some executives also declined to take bonuses.
But with most executives still able to command premium prices, corporate boards find it difficult to reduce the pay packages because they want to remain competitive, said Robin Ferracone, a partner at Mercer Human Resource Consulting.
Salaries and bonuses represent just a small part of the generous compensation packages for top executives at many of the nation's largest companies. Stock options, restricted stock awards, enhanced pensions and long-term incentive plans also elevated executive pay.
For example, at defense contractor Honeywell International, recently hired CEO David Cote's 2002 compensation package included $3.56 million in "other annual compensation" on top of his salary and bonus of $3.17 million.
The peripherals included: $118,667 to pay Cote's legal bills, $61,475 for his personal use of corporate aircraft, $60,300 for temporary housing, $28,944 for personal use of a company car and a $2.7 million "make-whole" payment to cover a bonus that Cote would have received had he not resigned from TRW Inc. to take the Honeywell job. Honeywell reimbursed him $394,903 for some of the taxes he incurred from all the extra income.
Cote is scheduled to receive another $2.3 million "make-whole" payment this year.
Meanwhile, Honeywell's stock dropped 29 percent between Cote's February 2002 hiring and the end of the year, wiping out $7.7 billion in shareholder wealth.
Cote's extra pay helped increase his total 2002 pay to $31.9 million, which placed him among the 10 highest paid executives nationwide last year.
In its annual report to shareholders, Honeywell's compensation committee said it negotiated Cote's contract after it "considered competitive market data ... at large industrial companies."
