Avery CEO Gets 72% Gain in Pay, Bonus

Label maker Avery Dennison Inc., wrestling with lackluster earnings growth and an investigation into price-fixing allegations, gave its top officer a 72% increase in salary and bonus in 2004.

Philip Neal, who announced last month that he would step down as chief executive of the Pasadena-based company in May, earned $2.56 million last year, largely as the result of a $1-million hike in his bonus to $1.5 million, on top of his salary of $1.06 million. He earned $1.49 million a year earlier: $993,000 in salary and a bonus of $500,000. Neal plans to stay on as Avery’s chairman until 2006.

Neal also got stock options worth $1.5 million in 2004 and $162,976 in perks, such as the use of company planes, cars and financial planning. He exercised $3.4 million in stock options during the year, taking home a total pay package worth $7.7 million. Neal’s compensation was disclosed in a Securities and Exchange Commission filing late Thursday.

Avery spokesman Charles Coleman said the company granted bonuses based on performance and that Avery was coming off a good year. The firm’s profit rose 4% on a 12% gain in sales.

Profit would have been higher if not for restructuring costs written off over the last two years, Coleman added.

The company’s proxy statement noted that Avery hired a compensation consulting firm to look at “competitive pay levels.” That study caused the company to revise upward its annual bonus and long-term incentive plans to “maintain market competitiveness ... in the diverse global markets in which the company operates.”

Avery didn’t name the consulting firm it hired or say which companies’ compensation plans it studied. Those omissions are red flags for shareholders, said David Thomsen, director of ERI Economic Research Institute, a Redmond, Wash.-based firm that supplies compensation survey data to the Internal Revenue Service and corporations.

“The game is played in the comparables,” he said. “I can get myself a 72% raise by only comparing myself to the 50 biggest companies in the world.”

Coleman said late Friday that Mercer Human Resource Consulting conducted the comparison study; Avery didn’t disclose it because it wasn’t required to, he said. Mercer officials couldn’t be reached for comment.

For the last two years, Avery has been under investigation in the U.S. and Europe for alleged price fixing and manipulation of the paper market. Avery said in November that a probe had uncovered “instances of improper conduct” that could lead to fines. The company has not disclosed how much it might have to pay to settle any possible charges, but did say that those fines could be “material” to earnings.

Coleman said Avery had not set aside reserves to cover those fines.