Many top executives in the Kansas City regions public companies gained multi-million-dollar wealth last year.
By DIANE STAFFORD and MARK DAVIS
The Kansas City Star
The 2012 fiscal year was, said Mercer compensation expert Spencer Fields, a perfect storm to plump up executive pay.
One force was the pay-for-performance trend, born of pay regulations designed to align executive rewards with shareholder interests. That force has pushed dollars from straight pay to bonus pay and stock options.
Then came sterling stock market growth in 2012. As a result, the value of the executives stock and option compensation mushroomed along with their companies stock prices.
Many executives realized big gains last year by using previously granted stock options to buy shares at below the prevailing stock market price. Many realized gains on their vesting days the dates they obtained personal control of previously restricted shares granted to them by the company.
To better show just how generous their 2012 total wealth accumulation was, Star 40 this year added a second Wall Street Payday executive compensation chart, on this page.
The new chart digs into the corporate proxy reports to show the combined snapshot values of all their share gains, through both stock and options awards previously granted by the companies. And it wasnt just chief executives who raked in these rewards.
The top five officers at OReilly Automotive Inc., for example, realized more than $27 million in value from shares they collected through previous restricted stock grants and stock option awards. Chairman David OReilly accumulated about $12.9 million of that total, easily the biggest gain among Star 40 companies executive ranks.
Last year, 42 executives in the Star 40 companies each gained at least $1 million worth of stock through these prior awards, corporate reports show.
Its important to note that the new realized values chart is just one measure of wealth accumulation. It doesnt say whether the executives sold their shares and pocketed cash or continue to hold the stock and ride their companies share prices up or down.
In other words, for executive pay, there isnt an annual take-home pay number printed in a box like on most workers annual Form W2s. But thats where the traditional Star 40 CEO compensation chart has tried to come close.
The Star 40 CEO pay tally the larger chart on the next page that includes most of the Star 40 CEOs tells what the companies listed on their corporate books as their compensation expenses at the time the restricted stock and stock option grants were made to their CEOs. Thats different from the values the executives eventually realized, which is the value the smaller chart on this page shows for some.
The big chart shows that million-dollar base salaries as paid to Cerner Corp. CEO Neal Patterson and Waddell & Reed Financial CEO Hank Herrmann are only the beginning.
For most of the bigger-company CEOs, stock awards, options and non-equity incentive compensation dwarf their base pay. Column after column are filled with multi-million-dollar numbers.
For some, like H&R Block CEO William C. Cobb, about $9 million in stock and options awards far outclassed his $951,200 base salary and more than $1.7 million in bonus and incentive pay. That kind of compensation structure is consistent with the pay-for-performance intent to link executive pay with corporate performance. Cobb may or may not collect that $9 million in the future; it depends on what happens to the value of Block stock.
For others, such as CEOs Daniel Hesse at Sprint Nextel and Herrmann at Waddell & Reed, and former CEO Thomas McDonnell at DST Systems, multi-million-dollar numbers appear as non-equity incentive pay. Non-equity incentives can be figured differently by different companies, but basically theyre a bonus tied to performance.
Seaboard Corp. classified Steven Breskys $1.2 million added pay solely in the bonus column. Spirit AeroSystems Holdings divided Jeffrey Turners performance-based pay into both the bonus and non-equity incentive columns.
Other items of note:
• Some longtime Star 40 executives besides David OReilly were big payday winners last year because of previous stock and option awards. McDonnell, who retired from DST, and Michael Haverty, executive chairman of Kansas City Southern, benefited handsomely by such gains. McDonnells gain was nearly $9 million, and Havertys more than $7 million.
• Other Star 40 CEOs who each realized more than $3 million in stock gains last year were Patterson at Cerner, Greg Henslee at OReilly, Angelo Brisimitzakis, who retired as Compass Minerals International CEO during the year, David Brain at EPR Properties, David Haffner at Leggett & Platt, Hesse at Sprint, and Turner at Spirit AeroSystems, who also has retired.
• It wasnt just CEOs who benefited. Thanks to vesting, other $3 million-plus wealth accumulation reported by Star 40 companies went to Thomas McFall, chief financial officer at OReilly, to Philip J. Sanders, chief investment officer at Waddell & Reed, and to Marc Naughton, Michael Nill and Zane Burke, other top-five executives at Cerner.
• David OReilly was by far the biggest wealth accumulator among Star 40 executives last year, but because he is chairman he isnt on the CEO pay chart. On the CEO 2012 pay chart, Cobb, at H&R Block, topped the list.
• Look for at least six new Star 40 CEOs in 2013. Clifton Pemble has succeeded Min Kao at Garmin Ltd.; Steve Hooley has followed McDonnell at DST; Fran Malecha now has the job at Compass Minerals, Terry Bassham is CEO at Great Plains Energy, Larry A. Lawson heads Spirit AeroSystems, and Paul L. Thomas recently became CEO of NASB Financial Inc.
• Kao, who co-founded Garmin and whose wealth is estimated at well over $2 billion because of his Garmin stock, announced his retirement in December. His reported 2012 pay? Less than $600,000.
To reach Diane Stafford, call 816-234-4359 or send email to firstname.lastname@example.org. To reach Mark Davis, call 816-234-4372 or send email to email@example.com.