KB Home CEO Gets 25% Raise

Coming off the best year in its history, Los Angeles-based KB Home Corp. rewarded Chairman and Chief Executive Bruce Karatz with $20 million in salary and bonuses in 2004, a 25% raise from 2003.

In a Securities and Exchange Commission filing, KB Home said Karatz received a $14-million restricted stock award for 2004, up from $10 million the previous year. His $1-million annual salary and $5-million cash bonus were unchanged from 2003.

The higher payout follows a banner year at KB, which reported a 30% jump in annual profit to $481 million on a 21% increase in revenue to $7 billion in its fiscal year ended Nov. 30. The company’s shares rose 25% during the same period and have gained 8% this year.

On Friday, KB shares fell $3.64 to $112.80 in New York Stock Exchange trading after an analyst warned that the home-building sector’s profit might moderate this year.

The company built 31,000 homes in fiscal 2004, a 16% increase from 2003. It ended the year with a record backlog of 20,000 units valued at $4.8 billion.

Karatz has been one of California’s highest-paid executives for years. In 2003, his total compensation, which included stock options and other perks, was $28.2 million, ranking him seventh among executives at the state’s 100 largest public firms.

In 2004, Karatz received $165,000 in perks, which included use of the company airplane, financial planning and tax preparation services and car and gasoline allowances. He also was awarded $3.8 million in cash and granted options for 280,000 shares of stock with an exercise price of $76.50 as part of KB’s long-term incentive program.

The incentive program is the subject of a shareholder proposal brought by the Massachusetts Laborers Pension Fund to be voted on at the company’s annual meeting April 7. The fund, which owns 400 shares, said it wanted the incentives to be awarded by the board’s compensation committee and to be based on “clearly defined operational performance criteria” and other performance benchmarks.

The board is urging shareholders to vote against the proposal, saying the incentive program is needed to help “attract, retain and motivate executives.”

KB Home also is asking shareholders to approve a 2-for-1 stock split, the SEC filing said.