How the highest-paid NW CEOs stack up
It's a threepeat for Howard Schultz, who again is the highest-paid chief executive among Northwest public companies. Shareholders may feel they got their money's worth.
Seattle Times Business reporter
FOR THE THIRD STRAIGHT YEAR, Howard Schultz is the highest-paid chief executive among Northwest public companies.
The chairman, president and CEO of Starbucks earned $16 million in 2011, most of it in the form of stock and options. He got a 7.7 percent raise in his base salary, to $1.4 million, and a $3 million cash bonus.
On paper at least, Schultz took a 26 percent cut in total pay: His total compensation in 2010 was $21.7 million. But the board in 2011 also granted Schultz a $12 million special "retention" stock award that vests in three years if the company remains profitable.
Starbucks itself had an outstanding year: It rang up $3 billion in quarterly revenue for the first time, booked a record annual profit of more than $1.2 billion and delivered a 46 percent total shareholder return.
"Howard's pay reflects both competitive considerations and the unique value of his leadership to Starbucks shareholders, which was demonstrated again in our record 2011 results," the company said in a statement.
Shareholders may feel they got their money's worth.
"Investors in Starbucks did four times as well as investors in the Nasdaq," said Fred Whittlesey, an executive-compensation consultant on Bainbridge Island.
Overall, the 2011 median total pay of the top executives at 115 publicly traded companies based in Washington, Oregon and Idaho was $1.66 million, according to an analysis conducted by Equilar, an executive-compensation consulting firm, for The Seattle Times.
Median CEO pay was 11 percent higher than in 2010 at the 91 companies where the CEO was in place for two full years.
In the world of executive pay, how much the CEO makes is tricky to pin down. The majority of compensation for most top executives comes from stock and options that may be granted now but cashed in years later, so those components could eventually prove worthless — or be worth considerably more than the current estimate.
The biggest bucks for Schultz lie in options he's held for years, so they don't count in the latest year's Equilar compensation analysis. In 2011, Schultz realized a gain of nearly $37 million from exercising a decade-old option for 1.43 million Starbucks shares.
So while the company reports total pay of $16 million, Schultz's realized income from Starbucks — what he'll owe income taxes on — was more than $41 million.
That $41 million made Schultz the nation's ninth-highest paid CEO in 2011 among 817 Russell 3000 companies based on cash and income realized from stock and options, according to GMI Ratings, which analyzed proxies filed through early April.
And the coffee chain's CEO still held vested Starbucks options worth more than $117 million at the end of September, the company reports.
Mark Parker, president and CEO of the Beaverton, Ore.-based athletic footwear and clothing company, received total compensation of about $11 million in 2011.
That consisted of more than $1.5 million in salary, $2.7 million in bonus, $343,000 in profit-sharing and perks, according to the company's regulatory filing. Again, the lion's share came from stock and options, valued at $6.4 million.
Parker's total pay was 16 percent lower than in 2010, mainly because Nike didn't meet three-year performance targets for revenue and earnings per share set in June 2008, before the crisis on Wall Street.
However, in summer 2010, after Nike closed its fiscal year with profit up 28 percent, the board raised Parker's 2011 base salary by 5 percent and awarded him options on 15,000 more shares than in the previous year.
And Nike's board decided to make restricted stock awards an annual affair, instead of once every three years.
"This supports retention of key leaders and succession planning," the company stated in its proxy. Nike didn't respond to requests for comment.
It's been a good year for aerospace executives, including the top gun at Precision Castparts, a components manufacturer based in Portland.
CEO Mark Donegan received more than $9.9 million in total pay in the company's latest fiscal year, including more than $1.4 million in base salary, $1.6 million in bonus and options valued at $6.7 million.
His total pay was 28 percent higher than the previous year, largely thanks to stock options and a bonus award he received for beating performance targets for earnings per share and return on assets, the company disclosed in its proxy.
The board, citing Precision Castparts' recent performance and "the effectiveness of Mr. Donegan's continuing leadership," also gave him an 8 percent salary raise. That puts his pay in the top 25 percent of CEOs from peer companies, according to the company's proxy.
The company reported a profit of $1.0 billion last year, up from $922 million in 2010.
Revenue grew to $6.2 billion from $5.4 billion.
Precision Castparts had a total shareholder return of 18.5 percent for calendar-year 2011, compared with a 2.1 percent return for the Standard & Poor's 500.
A Precision Castparts spokesman said the company had no further comment on Donegan's pay package.
Despite the Great Recession, Bellevue-based Paccar has seen strong growth in its truck-manufacturing business globally — and it rewarded its top executives accordingly.
Last year, the company increased profit by 128 percent and dividend payments by 88 percent over 2010.
CEO Mark Pigott's total pay in 2011 was $9.2 million, up 53 percent from $6 million in the prior year, with almost all the increase tied to restricted stock valued at $3.1 million.
The company gave Pigott a 5.2 percent raise to his base salary after three years without a raise, according to its proxy.
Like many other companies, Paccar said it needed to give pay raises to be competitive with its peers.
Paccar said its consultant, Mercer, found that the midpoints of its executive salary structure were "on average 17 percent below the market median and the base salaries for the executive officers were between the market 25th percentile and the median."
In addition to his $1.4 million base salary and $3.1 million in stock, Pigott received $1.5 million in options and $3.1 million from a long-term incentive plan, according to Paccar's proxy.
The company said it had significantly outperformed the S&P 500 index for the 10-year period ending Dec. 31, 2011, delivering 14.6 percent annual average return compared with the S&P's 2.9 percent return.
The late Steven Appleton, CEO of the Boise-based manufacturer of memory chips, received $8.6 million in total pay in 2011, down 12 percent from the previous year.
His pay consisted of $950,000 in base salary, $775,200 in bonus, options valued at $3.2 million and stock valued at more than $3.6 million, according to Micron's proxy.
Appleton's pay fell due to a drop in his bonus, which is tied to the company hitting performance targets. Micron saw a $167 million profit in 2011, down from $1.85 billion profit in the previous year that boosted his 2010 total pay.
Among the top five highest paid CEOs of Northwest companies, Appleton had the highest percentage of his total pay consisting of equity — 80 percent, according to Equilar.
Appleton, an avid pilot, died in February when an experimental plane he was flying crashed shortly after takeoff in Boise.
Sanjay Bhatt: 206-464-3103 or email@example.com