O.C. Corporate Chiefs Had Year of Ups, Downs

For Ronald Foell, 1990 wasn’t the best of all possible years. As president of a major home building company, Foell spent much of the year grappling with his industry’s worst market slump in a decade.

Sales at Standard Pacific L.P. in Costa Mesa fell, profits dropped and Foell--who made almost $2.4 million in the boom of 1989--saw his compensation plummet, trimmed by 50% to make him one of the biggest losers in the state’s paycheck sweepstakes.

There were dozens of other public-company executives like Foell, men and--in rare cases--women whose compensation is tied directly to corporate financial performance and who, in a year that ended in recession, saw their pay packages level off or even shrink after years of seemingly unbounded growth.

There also were exceptions.

The Times’ annual survey of executive compensation at public companies found that 17 of Orange County’s leading corporate executives pulled down $1 million or more last year, up from 15 in 1989 and just three in 1988.

And a total of 41 executives had annual compensation packages of $500,000 or more, up from 36 in 1989.

Emil Martini Jr., chairman of Bergen Brunswig Corp. and the county’s highest-paid public company executive in 1990, saw his total compensation soar to nearly $2.2 million from $1.3 million in 1989, and William Shepard, president of Allergan, the Irvine pharmaceuticals maker, more than tripled his annual take to $1.2 million from the $369,552 he got in 1989.

In both of those cases, the companies’ profits grew substantially in 1990--Allergan’s up 42% and Bergen Brunswig’s up 39%. Martini’s compensation was swelled by nearly $1 million in special payments made to him when he retired as chief executive of the medial equipment and pharmaceuticals distribution firm he co-founded nearly 30 years ago.

But pay and performance didn’t always march in lock-step last year: James Carroll, president and chief executive of Wynn’s International, the Fullerton automotive additives maker, got a 28.6% raise, to $576,980 from $448,500, despite a 16% drop in corporate profits.

Things like that occur for a variety of reasons in the often puzzling world of corporate compensation, said Andy West, head of the executive compensation practice at the Wyatt Co., a major compensation consulting firm.

At large firms, he said, “managers usually are professional managers who are hired to do the job. They don’t have a big stake in the company, so they typically are rewarded with big pay packages. They get cost-of-living raises every year, whether it was a good one or a lousy one, and their bonuses typically go up in step with their base pay, so their total compensation keeps rising.” Compensation for professional managers also is often tied to what others in the same industry are making.

Pay, he said, is the way many executives keep score of their value to their companies and has become the glue, replacing loyalty, that keeps many companies and their leaders from separating.

But at the smaller firms that abound in Orange County, the top managers often are also the founders, and they typically retain a big share of their company’s stock after it is taken public.

Because their real wealth is in the value of their stock, top officers are more likely to keep a lid on their pay, effectively reinvesting much of their potential annual earnings in the company to help it grow, West said. Compensation for those executives is more likely to keep pace with the economy.

Thus, while 1989 was the year Orange County executives saw compensation start to catch up with that of their counterparts in Los Angeles and San Francisco, the declining economy of 1990 widened the gap once again.

Despite the increase in million-dollar pay packages, the median compensation for top officers of local companies dropped 4.5% last year, to $186,500 from $195,219. And average compensation dropped nearly 9%, to $285,500 from $313,000.

Because only public companies report their top pay arrangements, such well-heeled local luminaries as Irvine Co. owner Donald L. Bren, South Coast Plaza developer Henry Segerstrom and home builder William Lyon don’t show up in The Times’ study. Their pay plans, like their companies, are private.

The Times’ analysis looked at the pay packages of 377 executives at 86 publicly traded firms headquartered in Orange County. For each company, the study included up to five of the companies’ most highly compensated executives--the only pay packages the companies are required to publicly disclose.

Once again, the list of highly compensated women executives was short: only eight of the 377 executives are female. And only two of the eight ranked among the county’s top 100.

The best-paid woman at a publicly traded company in the county for 1990 was Kathy Bronstein, executive vice president of Wet Seal Inc., the Irvine-based women’s discount clothing chain that just went public last year.

Bronstein’s compensation package of $546,785 ranked her 37th in the county and was good for sixth place among all women in The Times’ statewide study. She bumped Western Digital Corp. Executive Vice President Kathryn A. Braun from the county’s top slot.

Braun’s $473,441 compensation package, which rose 45% from $325,741 in 1989 despite a 29% drop in the computer parts maker’s annual profit, placed her 48th among all Orange County executives and eighth among all women executives in the state.

April J. Morris, chief financial officer of Standard Pacific L.P., the Costa Mesa home builder, dropped off the Orange County top 100 list. She was ranked 110th last year, down from 99th in 1989, as her total compensation dipped 5% to $269,800 from $284,175.

Performance bonuses and base pay put most of the local executives on the list of the most highly compensated public company managers in the county. But stock options, stock awards and a few special compensation arrangements provided significant boosts to several dozen pay packages.

More than half the county’s millionaire executives, in fact, got there with the profits from options, awards and other compensation and not because of salaries and bonuses.

Among them were Fluor Corp. executives Gerald Glenn and Hugh Coble, who serve as group presidents; Vincent Kontny, its chief operating officer, and Leslie McCraw, chief executive of the international engineering and construction firm in 1990 and now its chairman as well.

Kontny, for example, drew $711,529 in salary and bonus for 1990, but swelled that to a total compensation package of $2 million with $711,529 in stock option profits, $455,057 from stock awards and $39,441 in company-paid retirement and other benefits.

These so-called indirect forms of compensation have become increasingly important in recent years, said Lawrence Wangler, managing partner of the Newport Beach office of TPF&C;, the compensation consulting arm of Towers Perrin, an international benefits consulting firm.

One of the most common long-term benefits is a hefty retirement package and most top executives have one, either as a formal plan with well-defined benefits or in a special agreement calling for the executive to be paid as a consultant or special adviser after stepping down.

One of the more unusual, because of its limits rather than expanses, is spelled out in Downey Savings & Loan Assn.’s 1990 proxy statement for co-founders Maurice McAlister and Gerald McQuarrie.

While most retirement programs are arranged to provide income for life, the Downey plan promises the two men monthly paychecks for just 10 years after they retire and only on the condition that they also step down from the board of directors of the thrift they founded and have headed for 34 years.

A final class of compensation is the special arrangement that makes life easier for an executive but doesn’t necessarily put cash in his or her pocket.

Companies all over Orange County make low- or no-interest loans to their top managers, usually to enable them to buy homes in the county, where the average price of a four-bedroom home is $429,200.

In some cases, though, those loans can turn into gifts.

Consider George Boyadjieff, president of Varco International in Orange. His pay packet swelled by 31% in 1990 when, for the second year in a row, the company forgave a hefty chunk of a $402,662 interest-free loan it made him in 1987.

In 1989, the company forgave $150,000 of the principal and last year it forgave an additional $150,000. The loan waiver was in addition to $471,187 in other compensation for Boyadjieff last year.

And lest Boyadjieff fret about coming up with the scratch to pay off the remaining $102,662, the oil well service company’s directors noted in the annual proxy statement that “it is anticipated that the board of directors will consider additional forgiveness of the loan in the future.”

Pay scales and special deals that make top executives so well paid exist, said West, the Wyatt Co. consultant, “because the executive market has been a sellers’ market for the past 10 years and companies are scared to death they will lose their top people unless they pay them so much, with special stock and options and bonuses, that they make it difficult for other companies to make a run at them.”

Of course, companies still do make runs at one another’s executives. West said. The system, he said, is getting “perverse.”

Highest-Paid

Emil P. Martini Jr. retired as chief executive of Bergen Brunswig Corp. in Orange last August, and the cash that was piled on him by a grateful company made him the county’s highest paid executive in 1990.

Before taxes, Martini, who remains as chairman of the board, received $2,171,837.

To $658,087 in regular pay, add performance bonuses of $300,000 and $225,000, a retirement bonus of $225,000, a $13,750 annual retainer to stay on as chairman and $750,000 to agree not to set up a competing business.

Highest-Paid Woman

Kathy Bronstein, executive vice president of Wet Seal Inc., the Irvine women’s discount clothing chain, bumped Western Digital’s Kathryn Braun from the top of the list of highly paid women executives in Orange County with an annual pay package worth $546,785--all in cash.

Under a 1988 employment agreement, Bronstein’s base salary was set at $250,000 a year, with yearly increases on the preceding fiscal year’s pretax profits. She also gets an incentive bonus equal to 2% of each year’s pretax profits, worth $240,000 in 1990.

Biggest Raise

James M. Peters, chairman, president and chief executive of the J.M. Peters Co., a Newport Beach-based residential builder, saw his compensation more than triple to $1.4 million in the company’s fiscal 1990.

Wasn’t 1990 a rotten year for home builders?

It was, but the Peters Co. fiscal year ends in February, so fiscal 1990 ended when the real estate market was still perking along.

A performance bonus accounted for almost $1 million of Peters’ total compensation.

Biggest Bite

Think the recession hit you hard?

Consider the plight of James W. Conte, president and chief executive of Community Psychiatric Centers in Laguna Niguel.

Conte’s pay package last year shrank by $1.67 million, dropping 58% to $1.2 million from $2.9 million in 1989.

Actually, Community Psychiatric did fairly well in 1990. And Conte’s base salary and bonus reflected the increased business, almost doubling to $1.2 million from $675,000.

Just Gets Better

William J. Mylymok, new president and chief operating officer of West Coast Bancorp in Orange, was paid $120,000 in 1990 to serve as executive vice president of the company and president and chief executive of its Sunwest Bank subsidiary. His base pay goes to $375,000 this year--a 212.5% raise. And he can plan on that new boat--or maybe a fancy car or a globe-trotting vacation--because he is guaranteed base pay of $450,000 in 1992 and $525,000 in 1993. That works out to annual increases of 20% and 16.7%.

Big-Time Winners and Losers

The top winners and losers were determined on the basis of gains or losses in the executives’ cash compensation only. Stock options, awards and other payments are not included.

Increases

Name Company Raise 1. James M. Peters J M Peters Co. +$986,740 2. James W. Conte Community Psychiatric 525,000 3. Gavin S. Herbert Allergan 464,685 4. Safi U. Qureshey AST Research Inc. 427,200 5. Thomas C. K. Yuen AST Research Inc. 415,900 6. William C. Shepherd Allergan 331,762 7. Loren B. Shook Community Psychiatric 250,000 7. Richard L. Conte Community Psychiatric 250,000 9. J. B. Crowell Eldorado Bancorp 247,009 10. David S. Tappan Jr. Fluor Corp. 240,273 11. Jerome W. Cwiertnia National Education 188,479 12. Kathryn A. Braun Western Digital Corp. 162,377

Decreases

Name Company Cut 1. Christopher Gibbs J M Peters Co. -$1,129,110 2. Leslie G. McCraw Fluor Corp. -884,286 3. Hugh K. Coble Fluor Corp. -688,776 4. Vincent L. Kontny Fluor Corp. -643,626 5. Gerald M. Glenn Fluor Corp. -552,062 6. Albert L. Nichols Nichols Institute -378,346 7. Ronald T. Nishimura UnionFed Financial -343,125 8. Roger L. Kringen UnionFed Financial -336,193 9. Patrick E. Paddon Amplicon -284,984 10. H. Wm. Bridgford Bridgford Foods Corp. -226,650 10. Allan L. Bridgford Bridgford Foods Corp. -226,650 10. Hugh H. Bridgford Bridgford Foods Corp. -226,650

Highest-Paid Executive Suites

The 55 top officers of the dozen Orange County public companies with the largest executive compensation packages received a total of $40.4 million in 1990.

Total Executive No. of Company Compensation Officers 1. Fluor Corp. $7,920,398 5 2. Bergen Brunswig 4,308,579 5 3. J M Peters Company 4,110,420 5 4. Allergan 3,660,557 5 5. MAI Basic Four * 2,914,928 4 6. Nichols Institute 2,741,929 4 7. UnionFed Financial 2,561,893 5 8. Community Psychiatric 2,515,756 4 9. Standard Pacific L.P. 2,463,533 3 10. Beckman Instruments 2,413,425 6 11. Pacificare Health 2,400,802 5 12. FHP International 2,360,734 4

* Now MAI Basic Systems