SPECIAL REPORT: EXECUTIVE PAY : ‘Black Sheep’ Finds Golden Fleece
Martin L. Flanagan’s parents playfully labeled him the black sheep when he decided to leave his suburban Chicago hometown and forgo the family tradition of working at the Board of Trade.
They wouldn’t call him that now--even in jest.
Flanagan, senior vice president and chief financial officer of mutual fund giant Franklin Resources Inc. here, last year collected a $13-million pay package that landed him atop The Times’ list of the highest-paid executives at California’s 100 biggest public companies.
Not yet 34--and uncomfortable in the compensation spotlight--Flanagan hastens to explain that his hefty 1993 pay resulted in large part from accounting aberrations related to Franklin’s 1992 purchase of Templeton, Galbraith & Hansberger Ltd., for which he had been a top official based in the Bahamas.
Flanagan, who married into the mutual fund business, essentially got three years’ worth of contractual, multimillion-dollar bonuses lumped into one. The $6.65 million in restricted shares that constituted almost half his pay represents an accumulation dating from 1986, he noted; if he leaves the company anytime soon, he loses it.
That said, the fact remains that Flanagan got a magnificent windfall last year--roughly 500 times the median California industrial worker’s 1993 earnings. Which prompts the impertinent question: How is he spending all that dough?
Aside from investing heavily in Franklin-Templeton funds and donating to his prep school and college, Flanagan said that so far he has done little with the proceeds. The demands of his new job--trying to pull the two organizations together and meld their far-flung information systems--leave scarce moments to cogitate on his own sybaritic strategies.
“I do a poor job of taking care of myself,” said the brown-haired, freckle-faced executive. “I don’t have fancy goals. No yachts, no racing cars, no planes, no horses--none of that good stuff.”
He just bought a Lexus, though, his first new car in 10 years. Flanagan’s seventh-floor office sports a sweeping view of San Francisco Bay. A table holds snapshots from an African safari; the walls are hung with sailing ship prints collected in the Bahamas and watercolors from Singapore.
Describing himself as solidly Midwestern in values, Flanagan said his chief aspirations are to have a happy, healthy family and to return every summer for the Flanagan clan’s annual reunion in northern Wisconsin’s lake country.
He was born June 28, 1960, and grew up with two older sisters and a younger brother in Wilmette, an affluent suburb of Chicago. His mother was a homemaker, his father a longtime executive at the Board of Trade, as were Flanagan’s maternal grandfather and an uncle.
At Southern Methodist University in Dallas, he received dual bachelor’s degrees in business and Ibero-American civilization. Under SMU’s auspices, he studied in Spain, Ecuador and Peru. Arriving in Peru on the day of the nation’s first general election in 12 years, he was greeted by tanks rolling down streets and armed soldiers positioned behind sandbags. While there, he got his first significant exposure to poverty and its ill effects on a country’s productivity.
After graduation, Flanagan worked in Dallas for Arthur Andersen, the accounting firm, expecting to become a partner.
But he changed course in 1983 after serving as chaperon on a church youth group’s white water canoeing trip, sponsored by Thomas L. Hansberger, the president of Templeton. At the time, Flanagan was dating Jennifer Gelety, a Templeton employee whose mother later married Hansberger. As Flanagan puts it half-jokingly, “My wife got me my job.”
(Flanagan and Gelety, married in 1986 and have two sons, Casey, 3, and Ryan, 2.)
At Templeton, Flanagan worked as part of a three-person team to develop affiliations and joint ventures with overseas firms. During his tenure, the company’s assets under management grew to more than $20 billion from $2.5 billion. He rose to chief operating officer before moving to California a year ago for his current posts at the combined companies, which together manage about $112 billion in assets.
Sir John Templeton, the legendary former fund manager for whom Flanagan worked in the Bahamas, recalled in a telephone interview from his Nassau office that Flanagan was known for intelligence, reliability and new ideas.
“Those were the things that made him valuable,” Templeton said. Of Flanagan’s new positions, he said, “I think I said to Marty that I can’t recall a person who became CFO of such a big company at such an early age.”
Donald Phillips, publisher of Morningstar Mutual Funds in Chicago, praised the long-term records of both Templeton and Franklin and noted that Templeton offers a big plus for shareholders by compensating key employees with stock that locks them into the company. (The restricted stock granted Flanagan last year represents Templeton shares accumulated since 1986 that were converted to Franklin shares.)
“The merger just looks brilliant now in retrospect,” Phillips said. When value and global reach came back into favor last year, he noted, “Templeton funds turned in a terrific performance.”
The Flanagans have climbed significant mountains, including Kilimanjaro, but “not soapboxes,” he said. He does not contribute anything out of the ordinary to special causes, but is instead trying to build a secure future for his family. They are renting a home while their $2.2-million house in the posh community of Hillsborough is renovated.
Flanagan said he understands and agrees with the current rage among stockholders that executives be held more accountable and that pay be linked to performance. Franklin’s compensation, he added, is “not out of line” with the industry, and its expenses are comparatively low.
“I don’t know that anybody earns this type of money,” he said, adding that at Templeton, his wealth grew with the organization. But he is proud of the fact that “shareholders and clients did a whole lot better on a relative basis.”
Times researcher Norma Kaufman contributed to this report.
