Three Avista Corp. executives each earned more than a million dollars in 2006, reflecting the company’s stance that it needs to keep pace with pay packages offered by competitors.
The Spokane company disclosed Thursday that Chairman and Chief Executive Officer Gary Ely’s total compensation was $3.3 million last year, about $800,000 more than he earned in 2005.
Scott Morris, president of Avista and chief operating officer overseeing the firm’s regulated utility, earned a pay package totaling $1.1 million in 2006, $300,000 more than a year earlier. Morris will take over the company’s top post upon Ely’s retirement at the end of the year.
Malyn Malquist, Avista executive vice president and chief financial officer, also earned about $1.1 million in 2006, $300,000 more than he did in 2005.
Executive pay is a sensitive issue at Avista as some ratepayers and critics decry the salaries, bonuses, stock awards and other compensation following rate hikes during the past several years.
Avista’s board of directors sets the pay guidelines, including an incentive program that awarded Ely shares of stock valued at $1.3 million, nearly double his base salary of $710,000.
Company spokeswoman Jessie Wuerst said 22 percent of executives’ overall earnings are paid through the retail rates Avista charges its power customers. The remainder is paid from Avista’s $916.8 million in stockholders’ equity, which is the sum of its stock value and retained earnings.
The company also noted that this year’s compensation numbers are skewed because of new disclosure rules required by the U.S. Securities and Exchange Commission. For example, a major piece of Ely’s pay – about $510,000 – represents the change in value of his retirement package, including pension plan accruals and a special plan only for executives.
Wuerst said that Ely, just like any other employee, didn’t receive the change in value as take-home pay in 2006.
Companies across the country this year are reporting more detail about the pay and perks of top executives than ever before. The federally mandated changes also require companies to disclose how much they spend for executive car allowances, country club memberships and personal travel.
Avista does not offer such perks for its employees, Wuerst said.
“The company just doesn’t pay for those kinds of things,” she said.
Avista reported that Marian Durkin, senior vice president and chief compliance officer, received $28,620 in relocation expenses. She joined the company in mid-2005, moving from Chicago where she was an executive with United Airlines Inc. Avista considers relocation payments as compensation, not perks.
A key component of Avista’s executive pay is a long-term incentive program based partly on customer service and performance benchmarks such as earnings-per-share numbers, which are closely watched by stock analysts and shareholders as an indicator of company performance.
The long-term incentive program has become a fixture of executive compensation at Avista. It is measured in three-year increments and awards performance shares. In 2006, the second year of the program, Avista’s top five executives received about $2.3 million worth of performance shares and restricted stock.
The pay figures are designed to be competitive with 30 other utility and energy companies, according to the company’s filing.