Executive Pay in State Sees Modest Gains in 2008

(For the annual list of top executive compensation packages, click here.)

This year’s list of the executive pay of Arkansas’ public companies is a far cry from last year’s list, although the usual suspects at the state’s remaining Fortune 500 companies dominate the upper end of the pay scale.

The 2007 list was skewed by the $27.5 billion sale of Alltel Corp. to private equity firms, which gave five of the top Alltel executives pay the likes of which had never before been seen in Arkansas.

No $100-million-plus compensation packages were paid out to Arkansas executives in 2008, although proxy statements filed with the Securities & Exchange Commission disclose that most of Arkansas’ executives fared somewhat better last year than in 2007. And in that way, Arkansans fared better than their counterparts across the nation.

That’s especially true of Murphy Oil Corp. executives, who took advantage of a high-water mark in the El Dorado company’s stock price to cash out stock options.

Lee Scott, the former CEO of Wal-Mart Stores Inc., carried home the most pay by far last year at $31.2 million, but that was about $2.4 million less than what he earned in 2007. One big difference was in the category of bonus pay, which fell to $5.8 million, compared with $8.4 million the year before.

The next three spots on the list are occupied by Murphy executives. David Wood, who took over as Murphy’s president and CEO at the beginning of this year, earned $14.87 million last year, when he was an executive vice president, after getting only $3.4 million in 2007. Most of the increase came in the form of $10.1 million he realized on the exercise of stock options.

Arkansas Business’ formula for calculating total compensation includes all compensation reported by the company, plus any cash realized by the exercise of stock options. Unexercised options are not included in the total.

Murphy’s former CEO and now chairman, Claiborne Deming, wasn’t far behind Wood with earnings of $14.85 million. That is down from $17.7 million in 2007.

Steve Cossé, executive vice president and general counsel for Murphy, also realized a large gain – $10.9 million – from exercising stock options, running his total compensation to $14.4 million, compared with $3.2 million in 2007.

Wal-Mart executives, including the new CEO, Michael Duke, who took over in February after being vice chairman of the international division, took up the next four positions. Duke’s pay actually shrunk a bit, falling to $13.3 million from $14.1 million as his bonus pay declined by $1.4 million.

The other Wal-Mart top earners in the top 10 include Eduardo Castro-Wright, vice chairman, who took home $11.1 million; Thomas Schoewe, EVP and CFO, who was paid $10.2 million; and Douglas McMillon, EVP, at $8.3 million.

Rounding out the top 10 were Richard Bond, the former CEO of Tyson Foods Inc., who received $7.9 million before he was ousted. The year before, he received $11 million.

Jeffery Gardner, CEO of Windstream Corp., got a nice raise last year to $7.2 million, compared with $5.8 million in 2007.

 

Shorter List

This year’s list includes only 88 executives, compared with the 109 who appeared last year. Gone, of course, are the Alltel execs, but also missing are those at ThermoEnergy Corp. of Little Rock.

ThermoEnergy hasn’t filed an annual report for its fiscal year that ended Dec. 31, 2008, and it hasn’t filed a quarterly report for the period ended March 31 or a second-quarter report. As a result, the Financial Industry Regulatory Authority sent the company a notice that its securities were not eligible for continued quotation on the over-the-counter bulletin board.

In a filing with the Securities & Exchange Commission in June, the company said it expects continuing delays in the filing of its annual report and quarterly report “due to ongoing difficulties in obtaining information necessary to complete such reports.”

Other companies, including Advanced Environmental Recycling Technologies of Springdale, revealed salaries for fewer executives than in previous years.

 

Women

Last year there were five women on the list, led by Alltel CFO Sharilyn Gasaway’s big take.

This year? We could find only four women and each of them took a big hit in pay.

Judy McReynolds, senior vice president, chief financial officer and treasurer of Arkansas Best Corp., saw her pay cut to $418,578 from $640,021 the year before.

Sherri Billings, EVP and CFO at First Federal Bancshares of Arkansas, took an even bigger hit in the pocketbook, falling to $300,353, compared with $640,261 in 2007. All the other named executives at First Federal saw similar cuts.

Drue Matheny (formerly known as Drue Corbusier) pulled in $1.04 million in 2008 to rank No. 36. The executive vice president at Dillard’s Inc. – she’s a daughter of founder William Dillard and sister to Chairman and CEO William Dillard II – earned $1.99 million in 2007.

Denise Mahaffy, another Dillard’s vice president and sibling, took home $439,650, compared with $608,014 the year before.

(All of the named executive officers at Dillard’s have seen a continuing drop in pay over the past three years linked to a continuing decline in sales and earnings as well as a sharp drop in the price of its stock from $22.57 in April 2008 to $2.50 in November. William Dillard III, another vice president and son of William II, garnered $394,000 last year, compared with $495,427 in 2007.

William Dillard II managed compensation of $2.5 million, down from the $2.9 million of 2007. Brothers Alex, who is president, and Mike, an EVP, took home $1.3 million and $917,365, respectively.)

Other New Leaders

As always, there are a few new faces among the executives of the state’s public companies.

Daniel H. Cushman took over as president of P.A.M. Transportation Services Inc. of Tontitown in July, as longtime president and CEO Robert Weaver’s contract wasn’t renewed.

Cushman, a transportation industry veteran, isn’t on our executive compensation list because he wasn’t on P.A.M.’s payroll in 2008, but the company has disclosed his starting pay package to the SEC: salary of $400,000 plus moving expenses. And he’s eligible for bonuses.

Also in July, C. Randall Sims (No. 57) leapfrogged over Chief Operating Officer Ron Strother to become the new CEO of Home Bancshares Inc. of Conway. He had been CEO of Centennial Bank (formerly First State Bank) at Conway and a director of Home BancShares since 1998.

Johnny Allison, who had been CEO since Home Bancshares’ inception, remains as chairman.

Sims received $524,072 in compensation last year with the help of realizing $185,171 in stock options added to his $206,000 salary. With the promotion, Sims’ annual salary will increase to $275,000, and he will continue to be eligible for an annual cash bonus, use of a company car with gasoline reimbursement, paid country club dues and other normal employee benefits, including 401(k) contributions. Any bonus will be limited because of the company’s participation in the Department of the Treasury’s Troubled Assets Relief Program.

The National Look

Compensation for CEOs was lower in 2008, but with the continuing recession and scrutiny over compensation packages, executive pay is likely to drop further this year.

A Towers Perrin examination of proxies filed by some 200 Fortune 500 corporations indicates executive compensation hasn’t been immune from the shocks to company performance brought on by the financial crisis and the recession.

It found that:

• The trend of year-to-year increases in executive compensation has reversed, in large measure because of a reduction in annual bonuses paid for 2008 performance;
• Companies are generally holding the line on executives’ salaries. Freezes in salary are widespread; and
• The value of recent equity grants has declined at many companies.

Overall, total direct compensation fell 2 percent last year for CEOs and 5 percent for CFOs, largely due to the drop in bonuses. Base salaries for both groups of executives increased, while long-term incentives showed little change.

Bonuses for CEOs at companies with fiscal years ending before September 2008 were essentially flat, while bonuses were down 28 percent among companies with fiscal years ending in September 2008 or later. Similarly, the value of long-term incentive grants made after September 2008 was down 23 percent compared with the prior year

Looking ahead to 2009 trends in executive compensation, Towers Perrin, an employee benefits consultancy, examined the Compensation Discussion and Analysis disclosures filed by the compensation committees of 135 Fortune 500 companies. It found:

• 44 percent are freezing executive salaries;
• 10 percent are reducing executive salaries, with the most common approach a 10 percent reduction below 2008 levels;
• 16 percent saw executives forgo – or compensation committees reduce – payouts of earned incentive awards in 2008;
• 14 percent announced that 2009 annual or long-term incentive awards will be reduced or eliminated; and
• 7 percent are curbing pay for directors.

Maybe one of the reasons Arkansas execs fared better than many last year was uncovered by Equilar Inc., a data-tracking firm, which found that CEO compensation rose at smaller firms in 2008 in contrast to the lower compensation in larger companies.

Median pay for CEOs of public companies with less than $1 billion in revenue rose 8.1 percent to $1.3 million in 2008, according to Equilar. Nearly a quarter of those CEOs ran companies with less than $100 million in revenue.

In contrast, an Equilar study of 378 CEOs of S&P 500 companies found median total compensation declined 7.5 percent to $8 million. Median revenue for the 378 S&P 500 companies was $8 billion in 2008.