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The Honolulu Advertiser
Posted on: Sunday, April 9, 2006

CEO paychecks fatter

By Rick Daysog
Advertiser Staff Writer

When Hawaiian Telcom, the state's largest phone company, lured Michael Ruley away from a Houston telecommunications company last year, it spared little expense.

Hawaiian Telcom's new chief executive received about $1.9 million last year, including $254,314 in moving expenses and $750,000 in bonuses.

Ruley's 2005 pay package was not out of line with the lucrative compensation packages offered to other top CEOs in Hawai'i.

Ruley was the third-highest-paid CEO behind Alexander & Baldwin Inc.'s Allen Doane, who earned nearly $4.9 million last year, and Bank of Hawaii Corp.'s Allan Landon, who received nearly $4 million, according to an Advertiser study of executive pay at publicly traded companies.

The study, based on filings with the Securities & Exchange Commission, found that average pay for chief executives in Hawai'i was about $1.7 million last year. That's equivalent to $4,500 a day, or about 23 times the median household income in Hawai'i and represents a 13.4 percent increase from the average CEO pay of $1.5 million in 2004.


Compensation experts say the growth in local CEO pay is a reflection of Hawai'i's booming economy, which has seen record visitor arrivals, soaring real-estate values and low unemployment.

"It's typical to see CEO pay go up with the economy, and particularly when the companies' performances are up," said Bill Coleman, senior vice president of compensation at Salary.com, a Needham, Mass.-based company that specializes in employee pay data.

Six of the heads of Hawai'i's largest publicly traded companies earned raises while three received pay cuts last year. Eight CEOs earned more than $1 million last year, including Ruley and:

  • Alexander & Baldwin's Doane, whose $4.9 million compensation package rose 53.1 percent from $3.2 million in 2004. Most of Doane's pay, about $2.8 million, came in the form of restricted stock awards, which benefited from a 28.1 percent rise in Alexander & Baldwin's shares during 2005.

  • Landon of Bank of Hawaii saw his 2005 pay double to $4 million after he replaced former CEO Mike O'Neill in September 2004.

  • Hawaiian Electric Industries Inc.'s boss Robert Clarke received a 26.7 percent cut in pay to about $1.6 million from the previous year's $2.2 million. Clarke, who plans to retire next month, saw his long-term incentive pay drop after the company failed to meet some performance goals last year.

  • Donald Horner, who became First Hawaiian Bank's CEO in January 2005, replacing Walter Dods, saw a healthy pay increase with his new title. Horner's 2005 pay was about $1.2 million, which was up 44 percent from his 2004 compensation of $868,233.

  • Hawaiian Airlines CEO Mark Dunkerley also took home $1.2 million last year, which was a 15 percent hike from his pay of about $1 million in 2004.

    "Running an airline these days is extraordinarily challenging," said Hawaiian chairman Lawrence Hershfield. "The fact that Hawaiian was one of only three carriers nationally to report an operating profit in 2005 and led the industry in service reliability is a credit to the company's management team and Mark Dunkerley's leadership as CEO."

  • Clint Arnoldus, Central Pacific Financial Corp.'s CEO, earned about $1 million last year, which was down from his 2004 pay of $1.6 million. Arnoldus' 2004 package was skewed by a one-time, $1.1 million bonus for the successful merger between Central Pacific Bank and City Bank in 2004.

  • Barnwell Industries Inc. CEO Morton Kinzler received nearly $1.1 million in the fiscal year ended Sept. 30. Barnwell, a natural- gas drilling and real-estate company, paid Kinzler $964,997 during its 2004 fiscal year.

    The growth in local executives' pay this year largely mirrors modest growth of paychecks for Mainland CEOs.

    A preliminary report by The Corporate Library, a Portland, Maine, corporate governance watchdog, found that CEO compensation nationally rose a median of 11.3 percent in 2005, which was well below the 30.2 percent growth rate the previous year, Bloomberg News said.


    Executives compensation, which is usually set by a committee within a company's board of directors, generally is based on the local company's bottom line. In most cases, profits were up last year as Hawai'i's economy was booming.

    Alexander & Baldwin, a shipping and real-estate company, saw its net profit rise 22.7 percent last year while its stock was up more than 28 percent to $54.24 per share.

    "It's hard to fault a CEO who's pay increased a lot because the company's stock price increased," said Salary.com's Coleman.

    Bank of Hawaii, whose earnings were up 10.9 percent last year, also rewarded its CEO, Landon, for the company's performance.

    According to the company's proxy statement, Landon received more than half of his pay, or nearly $2.4 million, as restricted stock and other long-term incentive pay.

    Hawaiian Airlines' Dunkerley may have experienced the most challenging year for any of the CEO listed in this year's pay survey.

    Dunkerley became Hawaiian's top boss in June just as the airline emerged from bankruptcy protection. Since then, the airline has struggled with soaring fuel prices and increased competition on its Mainland routes but managed to report a small operating profit last year.

    In June, the airline will face new competition in the interisland market from low-cost carrier Mesa Air Group Inc., which will charge as little as $39 on some one-way fares.

    Dunkerley's salary was modest compared to what his predecessor, Bankruptcy Court-appointed trustee Joshua Gotbaum, was seeking. Gotbaum attracted heavy criticism from Hawaiian's employees, management and investors when he asked Bankruptcy Judge Robert Faris to approve an $8 million "success fee" after the airline emerged from bankruptcy.

    In November, Faris awarded Gotbaum $250,000 and called Gotbaum's $8 million request excessive.

    "It's a lot like professional athletes: They ask for it because they think they can get it," said Coleman of Salary.com.

    "But judges don't get paid $8 million, so they would find it hard to justify that the amount is necessary or appropriate."

    Reach Rick Daysog at rdaysog@honoluluadvertiser.com.

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