March 29, 1998 in Nation/World

Wall Street Boom, Good Business Climate Jack Up Executive Pay Many Top Executives Rake In Bonuses, Options Worth Millions

Tim Smart Washington Post
 

Michael Jordan has nothing on Michael Eisner.

Sure, his Airness may pull down $36 million from the Chicago Bulls for breaking NBA records. But that’s chump change compared with what the chief executive of Walt Disney Co. earned last year. Eisner had a payday of more than $575 million, as he cashed in stock options and reaped an annual salary and bonus of more than $10 million.

Eisner is an extreme case, of course. But the next few weeks are likely to reveal unusually lucrative pay packages for top executives.

With the arrival of spring, companies by law are releasing their annual proxy statements in which they disclose how much they paid their top executives last year. In this year’s proxy season, the numbers are going to be eye-popping, thanks to a booming stock market and a business environment that’s the best in decades.

Compensation expert Graef “Bud” Crystal said his early analysis of roughly half the top 500 companies that have released proxies shows chief executive pay rose 17 percent last year over 1996 - more than five times faster than the average 3 percent raise afforded most rank-and-file workers.

Crystal said that while salary alone for top executives is rising about 7 percent a year, bonuses bring the compensation growth closer to 10 percent - and stock options compound the increase. Leading the pay derby so far are financial services and entertainment industry executives.

“My gut feeling is we’re probably going to push higher,” Crystal said. “The biggest part of the increase is devoted to long-term compensation.”

“We expect this year’s numbers to be alarming,” said Bill Patterson, director of the AFL-CIO’s Office of Investment. “The dollar amounts are staggering.” He complains about that “growing distance between front-line workers and the CEOs.”

According to the AFL-CIO, which last year launched a Web site, Executive Paywatch, to monitor the issue, executive pay has risen an average of 500 percent over the past 15 years - three times faster than corporate profits and seven times greater than wages paid factory workers.

Yet, even as the numbers reach new heights, there is little of the public anger that emerged in the early ‘90s, when executives were taking home large paychecks at the same time they were downsizing operations and laying off workers.

“There is less noise about the amount of pay,” said Yale Tauber, a principal with management consultants William Mercer & Co. “You build an immunity to it.”

Tauber added that the rising stock market also has rewarded many workers who invest through mutual funds or employee benefit programs.

“Times are good,” Tauber said. “That’s dampening the reaction.”

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High-paid execs

Here is what some leading executives made in 1997, based on corporate proxies released so far this year:

Travelers Group chief Sanford I. Weill collected $220 million after exercising options on the company’s stock, in addition to $7 million in salary and bonus.

Compaq Computer Corp. chief executive Eckhard Pfeiffer saw his annual salary and bonus rise a modest 6 percent to $4.5 million in 1997, but directors granted him options worth up to $102 million.

Albert J. “Chainsaw Al” Dunlap - nicknamed for his practice of ridding companies of workers and assets - got a pay package worth about $70 million.


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