CEO Pay Hit Seven Year Low Last Year

08/12/11
By: Evan Belanger, Birmingham Business Journal

Since the recession started, local CEO compensation has dropped 44 percent

The annual earnings of Birmingham’s 12 highest paid public company CEOs hit a seven-year low in 2010 as some firms made big cuts in executive spending while a majority granted comparatively modest raises.

Local CEO compensation – which includes stock awards, bonuses and other monetary benefits – fell collectively to $44.9 million in 2010, down 6.3 percent from the prior year, according to recent filings with the U.S. Securities and Exchange Commission. Compared to pre-recessionary numbers, CEO pay has fallen 44 percent since 2006, when the city’s top 12 earners took home $80.3 million.

Despite a $3 million cut from his 2009 compensation, Donald James, CEO of Birmingham-based Vulcan Materials Co. (NYSE: VMC), maintained his long-held position as the city’s highest paid CEO in 2010. Overall, he took in $8 million, including $4.8 million in deferred compensation. That’s down 56.2 percent from his 2006 pay of $18.4 million, which included $11 million in deferred compensation.

James’ pay cut came in conjunction with a big dip in profits for the construction materials company that has struggled as cash-strapped governments cut back on road projects nationwide. Vulcan reported losses of $96.5 million in 2010. By comparison, in the five years prior to the recession, its annual profits averaged $358.7 million. James could not be reached by press time.

Other companies to cut CEO pay included Regions Financial Corp. (NYSE: RF), which paid its new CEO, Grayson Hall, nearly $4.6 million less than his predecessor, C. Dowd Ritter, earned in 2009. And Hibbett Sports Inc. (Nasdaq: HIBB) cut its executive compensation budget nearly $1 million by paying new CEO Jeffrey Rosenthal less than his predecessor, Mickey Newsome.

Meanwhile, Thomas Lowder, CEO of Colonial Properties Trust (NYSE: CLP), took home the largest raise, jumping from $317,151 in 2009 to more than $2.5 million in 2010, including more than $1.2 million in stock awards. That came as Colonial’s funds from operations, a key measure of performance for real estate investment trusts, fell nearly 37 percent to $81.31 million in 2010 – still higher than the $920,000 in funds from operation it reported for 2008. Lowder did not return a call for comment.

Executive compensation experts said the decline in executive pay for Birmingham CEOs was out of line with the national average since most large companies have been granting larger CEO raises in recent years as they continue building toward pre-recessionary profits. According to a survey by Mercer LLC, a New York-based human resources consulting firm, median pay for the nation’s top 350 CEOs has climbed roughly 43 percent since 2005, topping $8.6 million this year.

Paul Dorf, managing director of Compensation Resources Inc., said most large companies have been attempting to “catch up” on executive raises after holding back during the recession.

But he also said economic pressure and criticism over high executive pay has pushed many boards to tie CEO compensation more closely to company performance, which could result in significantly reduced pay if a company does poorly.

“We’re working with boards that are saying, ‘Hey, you don’t get a gold ring if the shareholders don’t get a gold ring, so there’s been much, much closer scrutiny,’” Dorf said.

Economists were hesitant to predict whether the weakened economy would support higher CEO pay in the near future, given the slow pace of recovery and recent stock losses following Standard & Poor’s downgrade of the nation’s credit rating.

“What we need is a lot of stimulus, and the only way to get that stimulus right now is to come out of the government sector,” said Trevor Bain, professor of labor economics and industrial relations at the University of Alabama. “Unfortunately I don’t see that happening.”

While CEO pay has little impact on anyone other than the executives themselves, it could be “a-tip-of-the-iceberg” indicator serving as an extra measure of company performance, said John Challenger, CEO of Challenger Gray & Christmas, an outplacement consulting firm.