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Cendant Increases Silverman's Compensation 55 Percent
02/18/04
By: Jeannine DeFoe, Bloomberg
Cendant Corp., the largest U.S. real estate and travel services company, increased Chief Executive Henry Silverman’s compensation by 55 percent last year, including a bonus of $13.8 million, as shares more than doubled.
Silverman’s pay of $22.85 million included a salary of $3.35 million and other compensation of $5.7 million, Cendant, the New York-based owner of the Days Inn hotel chain and Avis rental car compensation of $14.8 million in 2002 after being paid $36 million a year earlier.
Silverman’s bonus is pegged to the company’s pretax income, Cendant said in a Securities and Exchange Commission filing. Profit rose 38 percent last year as leisure travel increased and the company’s real estate unit, which includes the Century 21 and Coldwell Banker residential brokerages, benefited from record U.S. home sales.
“Any company that has its compensation tied to its profit is going to be pushing out the bonuses,” said Thomas McIntyre, at McIntyre, Freedman and Flynn, a money management firm in Orleans, Massachusetts. McIntyre’s firm owns about 700,000 shares of Cendant. “We’re happy about the last year and a half. They have a formula where the more the company makes the more Henry makes.”
Silverman, who is also chairman, realized $37.2 million by exercising stock options. He received no options for a second year. Cendant said last year it would account for options as an operating expense and reduce the issuance of them to employees.
Superstar Pay
Shares of Cendant fell 11 cents to $22.80 at 4:02 p.m. in New York Stock Exchange composite trading. They’d risen 2.5 percent this year.
The stock trades at less than the level reached in 1998, after Silverman’s HFS Inc., a hotel and real estate franchiser, merged with marketing firm CUC International. The stock plunged when Cendant said CUC overstated revenue, leading to the resignation and indictments of CUC’s former top officials.
Silverman’s other compensation included payments for insurance premiums, medical benefits and personal use of company aircraft.
He’s being paid as a superstar one more time,” said Alan Johnson, president of Johnson Associates, a New York-based compensation-consulting firm. “That’s consistent with the way he’s been paid over the years.”
Cendant will begin paying a 28-cent annual dividend this year and is paying down debt and buying back shares with its $2 billion in free cash flow generated.
“He’s increased the value tremendously for the company and his shareholders,” said Paul Dorf, managing director of Upper Saddle River, New Jersey-based Compensation Resources Inc. “We’ve seen bigger and bigger bonuses this year.”
Dorf said he questioned the structure of Silverman’s bonus.
“It doesn’t have a ceiling,” he said. “ I don’t like a bonus that doesn’t have a ceiling.”
Sales of new and existing homes rose to a record 7.16 million last year, according to the National Association of Realators.
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