Pay Slashed for Quarter of People at the Top : The cuts are blamed on declining earnings, shareholder anger and legislative furor.
More than 25% of the 1,580 executives of California’s largest public companies saw their cash compensation slashed in 1991, according to the Los Angeles Times’ annual executive compensation survey.
The pay cuts--406 in all--are attributable to a powerful combination of declining corporate earnings, increasing shareholder activism and legislative furor over runaway executive pay.
The reductions ranged from relatively modest decreases to more than half of some executives’ previous year’s salaries.
Consider Bram Goldsmith, chairman and chief executive of City National Corp. His normal $100,000 annual pay raise was shelved, his bonus was eliminated and he took a 10% pay cut on top of that. The result: Goldsmith’s compensation fell from $2.5 million to $1 million--a 61% decrease.
“Sure, it bothered me,” he said.
But City National’s financial results were poor in 1991. The bank lost $21.2 million during 1991, contrasted with a $44-million profit the year before. And that loss caused City National to cut its dividend.
Goldsmith said he’s happy to share the wealth when his company is doing well, but he’s got to share the pain when it’s not.
Lodwrick M. Cook, chief executive of Atlantic Richfield Co.--the state’s second-largest company--also took a heavy hit. When Arco’s profit fell 53% to $709 million, Cook’s annual bonus was cut in half. His pay dropped by $600,000 to $1.7 million from $2.3 million a year ago.
An Arco spokesman stressed that the company doesn’t blame Cook for the lower profit. It were largely caused by lower market prices for oil and gas--forces beyond Cook’s control. Nonetheless, “the bonuses have to reflect company profitability,” spokesman Al Greenstein said.
Michael Eisner, chairman of Walt Disney Co., took the largest pay cut by far. His salary dropped $5.79 million. Nevertheless, he was still paid $5.4 million, ranking as the state’s eighth-highest-paid executive. Eisner’s cut was the result of a new formula that bases his bonus on Disney profit.
Not everyone fared as well. Richard Stegemeier’s $278,628 pay cut helped knock him off the 100-best-paid list. The 63-year-old chief executive of Los Angeles-based Unocal Corp. was California’s 43rd-highest-paid executive in 1990. In 1991, he didn’t rank among the top 150, with total compensation of $923,918.
Such is the story at hundreds of companies in California and nationwide. Already firms ranging from General Motors to Westinghouse have revealed that executive paychecks are far lower this year than last.
And many corporations have announced plans to drastically rethink compensation practices to make paychecks better reflect company performance. The changes are not altogether altruistic, compensation experts note.
“What you’re seeing is a knee-jerk reaction to the public furor over executive pay,” said Gary C. Hourihan, president of Strategic Compensation Associates in Los Angeles. “It is a result of people being scared that shareholders are going to take some action that’s really bad or that there is going to be some federal legislation.”
Added Ralph Whitworth, president of the United Shareholders Assn.: “I don’t think executives have suddenly gotten religion. They simply fear the wrath of exposure.”
Executive Pay Cuts
About 25% of executives at the 350 public companies surveyed by The Times had their cash compensation slashed in 1991. Here are the 25 largest pay cuts in percentage terms:
Name Title Company Roland G. Matthews COB,CEO Diceon Electronics Inc. Amin J. Khoury COB,CEO BE Avionics Inc. James M. Peters COB,P,CEO J.M. Peters Co. Louis W. Foster COB, CEO 20th Century Industries Bram Goldsmith COB,CEO City National Corp. Gene R. McGrevin P,CEO Syncor International Corp. John C. Crean COB,CEO Fleetwood Enterprises Inc. John C. Warner Ex-COB, CEO Quiksilver Inc. Michael D. Eisner COB,CEO Walt Disney Co. R. Charles Scott COB,CEO Intermark Inc. David A. Derby P,CEO Datron Systems Inc. Martin S. Blinder COB,CEO Martin Lawrence Ltd. Editions John W. Amerman COB,CEO Mattel Inc. Carl E. Reichardt COB,CEO Wells Fargo & Co. George M. Scalise P,CEO Maxtor Corp. Lawrence J. Ellison COB,P,CEO Oracle Systems Corp. Steve L.W. Hui COB,CEO Everex Systems Inc. James R. Ukropina COB,CEO Pacific Enterprises Lewis B. Merrifield P,CEO Pic ‘n’ Save Corp. James Carroll P,CEO Wynn’s International Inc. John Sculley COB,CEO Apple Computer Inc. Robert Gumbiner CEO FHP International Corp. George L. Graziadio VCOB,P,CEO Imperial Bancorp Stewart Carrell COB,CEO Diasonics Inc. Jim Farooquee P,CEO CMS Enhancements Inc.
Guide to abbreviations
CEO: Chief executive officer; CFO: Chief financial officer; COB: Chairman of the board; P: President; VCOB: Vice chairman of the board
Percent 1991 change 1990 salary from salary Name and bonus 1990 and bonus Roland G. Matthews $60,759 -74 $237,033 Amin J. Khoury $129,000 -70 $432,000 James M. Peters $457,750 -67 $1,403,240 Louis W. Foster $504,000 -64 $1,404,000 Bram Goldsmith $1,000,000 -61 $2,531,860 Gene R. McGrevin $254,404 -56 $582,170 John C. Crean $479,268 -55 $1,070,520 John C. Warner $299,000 -52 $618,000 Michael D. Eisner $5,441,543 -52 $11,233,229 R. Charles Scott $317,122 -51 $651,574 David A. Derby $213,636 -48 $409,179 Martin S. Blinder $464,236 -48 $896,543 John W. Amerman $1,364,423 -47 $2,560,221 Carl E. Reichardt $775,000 -47 $1,468,333 George M. Scalise $418,916 -45 $768,079 Lawrence J. Ellison $900,000 -44 $1,599,756 Steve L.W. Hui $228,553 -42 $392,915 James R. Ukropina $594,031 -40 $991,000 Lewis B. Merrifield $583,286 -40 $975,000 James Carroll $349,000 -40 $576,980 John Sculley $1,338,004 -39 $2,198,866 Robert Gumbiner $707,000 -39 $1,164,000 George L. Graziadio $551,137 -39 $910,178 Stewart Carrell $625,262 -37 $998,883 Jim Farooquee $160,700 -36 $249,774
