Duke and Company Continue to Dominate Highest-Paid List

As usual, the CEO of Wal-Mart Stores Inc. leads Arkansas Business’ annual list of the highest-paid executives at the state’s public companies. Michael Duke earned $18.3 million in total compensation in 2011.

Coming in at Nos. 2 and 3, however, were Dillard’s president Alex Dillard with $16.4 million and his CEO brother, William Dillard II, with $15.1 million. An increase in the value of Dillard’s Inc. stock propelled three members of the Little Rock retailing family into the statewide top 10.

In Northwest Arkansas, however, Walmart execs continue to dominate the list, landing in six of the top 10 spots. Tyson Foods Inc.’s James V. Lochner (No. 5) and Donnie Smith (No. 7), and J.B. Hunt Transport Services Inc.’s John N. Roberts III (No. 6) and James Kirk Thompson (No. 8) are the only non-Walmart employees among the top 10.

As a service to its readers, the Northwest Arkansas Business Journal is running a list of the 35 executives from its six-county coverage area who made Arkansas Business’ 89-person list.

Forty-four of the executives — including 17 in Northwest Arkansas — earned at least $1 million, compared with 43 in 2010. Three area executives are in eight-figure territory on this year’s list, which uses compensation data for 2011. Only Duke held that distinction last year, based on 2010 data.

Arkansas Business’ annual list of public companies’ executive compensation is compiled using information found in the annual proxy statements of Arkansas’ publicly traded companies filed with the federal Securities & Exchange Commission. Total compensation is calculated using all compensation reported in the proxies, plus the actual value realized from the exercise of stock options during the year.

Other highlights:

• Duke’s compensation slipped in 2011, falling to $18.3 million compared with $18.7 million in 2010.

• Among the new Northwest Arkansas names on this year’s list are Roberts and Neil Ashe, executive vice president of Walmart.

• More than half — 43 — of the 74 who were on Arkansas Business’ statewide list both years saw total compensation rise.

• Thirty-three members of the statewide list exercised stock options.

The big bump in Dillard’s executives’ pay came primarily in the form of “other compensation” and in the exercise of stock options. In the retailer’s case, the increase in Dillard’s pension value accounted for most of the other compensation. For example, Alex Dillard’s other compensation totaled $8 million, of which $7.8 million was the improved pension value. Dillard also realized $3.7 million in the sale of his company’s stock.

Josh Henke is managing director of Longnecker & Associates of Houston, an executive compensation and corporate governance consulting firm. The Dillard’s surge in pay didn’t surprise him. Improved company performance justifies a hearty compensation package, he said.

“If they’re performing and they’re returning it back to shareholders, [the pay package] works well on the upswing,” Henke said. “The true story is, how does it work on a downswing? … If they’re not returning that value to shareholders in a downturn, are they going to have the reciprocal reaction to that?

“That’s the true telling if a compensation package is set up for true pay for performance.”

Dillard’s stock rose 18.3 percent in 2011 to close at $44.88. It has performed even better so far in 2012, rising 65.64 percent to $74.34 as of mid-morning on Aug. 27.

That strong showing, should it continue, could mean even bigger paydays for the Dillard family next year, and has the potential to push one of them to the top of the executive compensation list.

Looking Nationwide

2011 was a good year for CEOs throughout the United States, according to The Associated Press. The AP reported in May that CEO pay had risen 6 percent compared with the prior year.

The AP, using a somewhat different definition of total compensation, analyzed 322 companies in the Standard & Poor’s 500 and used data from Equilar, an executive compensation consulting firm. Median CEO pay was $9.6 million in 2011, the AP said.

In June, The New York Times, also using Equilar data, published its own analysis of executive pay at the nation’s largest corporations. The top executive on The Times list was Timothy Cook of Apple, who made $378 million in 2011.

Duke was the only Arkansas CEO on the list.

Northwest Arkansas Business Journal editor Rob Keys contributed to this report.