ITT Chairman’s Pay Cut, Tied to Performance
ITT Corp. confirmed Friday that Chairman Rand Araskog has become the latest top corporate executive to cut his compensation and tie it more closely to performance.
However, Morgan Stanley Group Inc. gave its senior executives big pay raises amid record earnings at the investment bank, becoming one of several Wall Street firms announcing boosts in compensation.
ITT’s Araskog had his compensation sliced by a third in 1991, dropping to $7.6 million from $11.4 million a year earlier.
“We changed the executive compensation plan to more closely tie executive compensation to the performance of the company,” spokesman Jim Gallagher said.
The pay cut came after intense pressure was placed on ITT by a number of shareholder groups, including the wealthy and powerful California Public Employees Retirement System.
CalPERS, as the group is widely known, lashed out at ITT last year for doubling Araskog’s pay between 1989 and 1990 at a time when company profits rose just 4%. In 1991, ITT’s earnings dropped nearly 15%.
The group, the nation’s largest pension fund, used its 1 million ITT shares to vote against the conglomerate’s slate of directors at its annual meeting, a protest that led ITT to reconsider Araskog’s earnings.
Under the new package, the cash portion of Araskog’s 1991 compensation--salary and bonuses--dropped to $4 million from about $7 million.
In addition, Araskog received 170,000 stock options potentially worth $3.5 million, compared to $4.2 million in restricted stock the year before.
But it was not all bad news for the longtime chairman. In setting his pay, ITT revised its long-term incentive plan for performance-related compensation.
Designed to give Araskog a bonus of $3.5 million in 1996, it could also give him as much as $7 million, or nothing, depending on how the company does.
“We’re pleased,” said Richard Koppes, general counsel of Sacramento-based CalPERS. “Not only (by) the cut but (by) the way they restructured the pay package to reward long-term performance.
“That’s exactly what we want to see more companies do. If the . . . shareholders do well, we don’t object to the (executives) doing well.”
CalPERS last week listed a number of corporations it is targeting over corporate governance issues ranging from corporate pay to shareholder advisory committees.
The $68-million pension fund said it was pushing the pay issue hardest with International Business Machines Corp., ITT, American Express Co. and Dial Corp.
Koppes said Friday that, as well as ITT, American Express and IBM had adjusted their executive compensation packages to reflect performance.
IBM said on March 17 that its chairman, John Akers, took a 40% pay cut in 1991, the computer maker’s worst year ever.
Meanwhile, Morgan Stanley said Chairman Richard B. Fisher, President Robert F. Greenhill and Chief Operating Officer John J. Mack each received 1991 cash pay of $5.3 million. That’s more than double their 1991 pay, the firm said.
Morgan Stanley had 1991 net income of $475.1 million, 76% higher than the $270.4 million it made in 1990.
Other Wall Street firms to award pay boosts to senior executives include Merrill Lynch & Co. and Bear Stearns Cos..
