Not Every CEO’s Take-Home Pay Is So Awesome
Keizo Yoshida is the top officer of Sumitomo Bank of California, a big, profitable institution. Yet with an annual pay package worth $210,400, he earns only a fraction of what executives at similar banks take home.
Yoshida isn’t destitute, of course. But neither is he unique. Even as big money gets all the headlines, a surprising number of top executives are paid relatively modestly.
The Times took a look at the 20 lowest-paid chief executives of California’s largest publicly held companies--those with sales exceeding $250 million. Not one of the men made more than $406,000, and Yoshida was the lowest paid among them. By contrast, the highest-paid executives running companies with revenues between $250 million and $500 million earned between $940,000 and $4.5 million.
Yoshida’s relatively low pay illustrates the huge difference between the lavish pay scales for American managers and the more modest ones for Japanese executives. As a Japanese citizen running a Japanese-owned California bank, Yoshida gets paid according to Japanese practices. In the Japanese automobile industry, for example, a chief executive’s pay on average is 20 times that of a blue-collar worker. In the U.S. auto industry, the ratio is 192 to 1.
Others on the low-pay list suffered because of poor profits at their companies. In many instances, executives take low salaries and rely on building the value of large equity stakes in their companies.
Managers with large ownership stakes in the firms they run often feel that their interests are better served by plowing profits back into the company rather than pouring them into their personal checking accounts, said Donald L. Lowman, principal at Towers, Perrin, Forster & Crosby in Los Angeles.
In fact, more than half the executives on the “low-paid” list own between 1% and 60% of the common stock in their firms. Some say their take-home pay is not that important.
“I went for seven years without a raise,” said Gerald Barton, chief executive of Landmark Land Co. in Carmel. Why? “I’m the one who recommends raises for the rest of the staff, and I’m obviously not going to recommend my own. I think the directors just forgot about me.”
Of course, Landmark has seen better days. The company lost $34.9 million in 1989, compared to a $16-million profit in 1988. And savings and loan regulators blocked the $967-million sale of several of the company’s resort properties. Landmark has since hired Salomon Bros. to find a buyer.
At Silicon Graphics, Chief Executive Edward R. McCracken’s pay can be explained by the company’s philosophy, said Mark Perry, executive vice president. The Mountain View, Calif.-based computer firm is one of the fastest growing in the nation, Perry noted. That’s partly because officers take relatively low base salaries in exchange for stock options.
The company then has more working capital, and the officers have the opportunity to reap tremendous rewards when the stock rises rapidly. So far they haven’t cashed in. When they do, their compensation will rise dramatically.
“Our stock was selling for $16 a year ago, and it’s going for about $32 now,” Perry said. “That would be a major element of compensation for somebody who owns shares.”
But not all are happy about their place on the low-pay list.
“It’s a dubious distinction,” muttered Hal Ellis, chairman and chief executive of San Francisco-based Grubb & Ellis, a diversified real estate firm.
Ellis said he’s on the list because his company’s performance is not up to snuff, and the company adheres to a pay-for-performance plan.
“If we achieved our profit goals for the year, some of us could have earned incentive compensation packages that would exceed 100% of salary,” Ellis said. “But last year virtually none of my compensation was in incentives, and the same holds true for the year before because the company’s profitability did not warrant incentive pay.”
Grubb & Ellis earned $521,000 on revenue of $362 million in 1989. The year before, it lost $1.9 million on $374.7 million in revenue.
“We have a strong upside when we can perform,” Ellis said, bemoaning the real estate slump. “That will eventually change. But in the meantime, our compensation gives us every incentive to do all we can to positively affect the profitability of the company.”
‘LOW-PAID’ CALIFORNIA CEOs
The lowest-paid chief executives for companies with sales exceeding $250 million:
NAME TITLE COMPANY 1 Keizo Yoshida P, CEO Sumitomo 2 Paul C. Barkley P, CEO PS Group 3 Gary L. Larkins P, CEO House of Fabrics 4 Bernard K. Tse CEO, P, COB Wyse Technology 5 J. W. Jorgensen P, CEO Earle M. Jorgensen 6 H. David Bright COB, CEO National Education Corp. 7 Edward R. McCracken P, CEO Silicon Graphics Inc. 8 Ernest Rady COB, CEO Westcorp 9 L. William Krause CEC, P, CEO 3Com Corporation 10 Don Freeberg COB, P, CEO Summit Health Ltd. 11 Harold Ellis P, CEO Grubb & Ellis 12 R. David Anacker P, CEO American Bldg Maintenance 13 Maurice Lewitt COB, CEO Nu-Med Inc. 14 Alfred J. Stein CEO, COB VLSI Technology Inc. 15 George M. Shortley P, CEO PS Group Inc. 16 Safi Qureshey CEO, P AST Research 17 Robert L. Witt P, CEO, COB Hexcel Corp. 18 Philip Brinkerhoff COB, P, CEO Financial Corp. of S.Barbara 19 Thomas J. Henderson COB, P, CEO Guy F. Atkinson Co. 20 Gerald G. Barton COB, P, CEO Landmark Land Co.
1989 Total Salary Stock Stock Other Comp. & Bonus Options Awards Comp. 1 210,400 196,000 None None 14,400 2 237,630 237,630 None None None 3 269,333 269,333 None None None 4 283,504 281,036 None None 2,468 5 285,692 281,282 None 4,410 None 6 305,533 195,462 5,654 104,417 None 7 306,000 306,000 None None None 8 314,480 314,480 None None None 9 322,075 322,075 None None None 10 330,000 330,000 None None None 11 335,911 315,000 None 5,387 15,524 12 337,005 337,005 None None None 13 342,900 342,900 None None None 14 350,311 350,311 None None None 15 351,701 351,701 None None None 16 357,300 335,000 None None 22,300 17 360,783 317,460 43,323 None None 18 368,490 355,266 None None 13,224 19 375,123 359,500 None None 15,623 20 405,463 405,463 None None None
METHODOLOGY:
The information was compiled by researcher Keating Holland of The Times’ bureau in Washington from proxy statements and annual reports. In cases where benefits or stock gains were reported over periods exceeding one year, the number shown on the chart is an annual average. In cases where 1989-90 proxy statements were not yet available, information is from the previous year’s proxy.
ABBREVIATIONS:
CEO--Chief executive officer
COB--Chairman of the board
CEC--Chairman of the executive committee
P--President
