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Published: Monday, 5/6/2013

Top area CEOs ended 2012 with fatter paychecks

At $20.6M, Marathon’s boss retained title of highest-paid

BY TYREL LINKHORN
BLADE BUSINESS WRITER

With shares of Marathon Petroleum Corp. up 89 percent last year, and shares of Cooper Tire & Rubber Co. climbing 81 percent, 2012 was a good time to be a stockholder in Findlay’s two largest publicly traded companies.

It was even better to be their chief executive officers.

Gary Heminger, the top man at Marathon, easily retained the title of the region’s highest-paid chief executive in 2012, with a total compensation package of $20.6 million.

Roy Armes, Cooper Tire’s chief executive, was paid $6.9 million, an increase of 127 percent from 2011. His was the biggest pay bump for any CEO in northwest Ohio, and it helped push him to No. 6 on The Blade’s annual list of highest-paid chief executives.

While those two stood out, 2012 was a good year for most of the men and women who lead publicly traded companies in the greater Toledo area.

Nine of the 15 men and women who led publicly traded companies in 2012 were paid more than $2.5 million.

Most were paid more last year than they were in 2011, and some, such as Mr. Armes, were paid much more. Seven of the 15 saw their total pay package rise more than 20 percent.

Three had pay cuts and one retired midway through the year.

The Blade reviewed U.S. Securities and Exchange Commission filings for 15 publicly traded companies in the Toledo area to compile compensation data for their CEOs and other senior executives.

The figures include salary and bonuses, estimated value of stock awards and options, performance-based incentives, values of perquisites such as cars and corporate travel, and company contributions to executives’ pensions and retirement plans.

Marathon is by far the biggest company in northwest Ohio, earning $3.9 billion on revenues of $85.2 billion in 2012. So it’s only fitting that Mr. Heminger, who has led the company since it was spun off from Marathon Oil Co. in 2011, received the biggest paycheck.

Mr. Heminger’s base salary jumped to $1.25 million in 2012 from just a shade more than $1 million in 2011. He also received more than $328,000 in other miscellaneous compensation. Most of that went to a defined-contribution plan, but it also included $54,920 worth of personal travel in the company aircraft.

Where he really cleaned up were in bonuses and stock awards. Marathon provided Mr. Heminger with a performance-based cash bonus of $3.25 million and stock options and awards of $7.6 million.

He was also paid a salary of $200,000 for his role in leading Marathon’s pipeline subsidiary, MPLX LP, which was spun off into a separate company in October.

All together, his reported compensation package for 2012 was $20.6 million, up about 18 percent from $17.5 million in 2011.

Paul Dorf, managing director of Compensation Resources Inc., a compensation and human resource consulting company in New Jersey, said corporate boards are generally being conservative in raising salaries but aggressive in offering variable incentives such as stock awards.

Mr. Heminger’s 21 percent base salary bump was the highest among companies whose filings The Blade reviewed.

Others who had substantial increases in their base salary were Heath Care REIT Inc. Chief Executive George Chapman, who gained 14 percent to $850,000, and Rurban Financial Corp. Chief Executive Mark Klein, who gained 12 percent to $246,000.

Others had more modest salary gains but still saw big bumps in total compensation.

Kurt Darrow, the chief executive at La-Z-Boy Inc. in Monroe, received a 7 percent salary bump to $816,651. Mr. Darrow’s total compensation package, however, increased 132 percent to $4.2 million.

Mr. Armes’ salary was 6 percent higher, but his total compensation package grew 127 percent.

Better bonuses

Mr. Dorf said bonuses and incentives were generally better in 2012 than they have been since the recession. Part of that, he said, is reaction to turnover. Many companies are looking to bring in new blood.

And while there are still jobless executives out there who can be had for less money, many companies prefer to hire someone who is working, even if they have to pay more.

“We’re seeing that’s happening,” Mr. Dorf said. ”Companies are recruiting not from the pool of people that are not working, but from the pool of people that are working. Therefore, companies are saying, ‘What can we do to keep our good people?’ ”

The answer, of course, is bigger paydays.

Many executives are also being rewarded for a year of growing shareholder value. While the economy might not have been charging ahead at full speed last year, the stock indexes were.

The Dow Jones Industrial Average gained 6 percent in 2012, while the S&P 500 gained 12 percent.

While there’s still an effort to more closely tie executive pay to company performance, with the market hitting record highs Mr. Dorf said some of the complaints have quieted.

“The shareholder value has increased, and therefore they’re not as outspoken, saying, ‘Hey, you’re making too much money,’ when the fact is, we’re making money,” Mr. Dorf said.

The Andersons Inc. and N-Viro International were the only two local companies whose stock price fell in 2012, and both of their CEOs took cuts in their total salaries. The Andersons CEO Mike Anderson’s compensation package dropped 5 percent, compared with a 1.7 percent decrease in The Andersons’ share price.

The biggest pay cut was that of N-Viro Chief Executive Timothy Kasmoch, whose compensation package tumbled 62 percent to $452,548. Shares of his company lost 18 percent on the year.

Other chief executives taking cuts were Mike Thaman at Owens Corning and Roger Wood at Dana Holding Corp.

Mr. Thaman’s pay dropped 16 percent to $7.8 million because of a decrease in cash bonus awards. Mr. Thaman dropped to fifth place on the list. In 2011 he was third on the list and topped it in 2010 and 2009.

Mr. Wood’s $8.8 million compensation package in 2012 was down 17 percent from the $10.7 million he was paid the year before, his first at Dana. In 2011, the bulk of Mr. Wood’s pay package came in the form of restricted stock awards worth $6.2 million.

The awards were part of a negotiated employment deal that lured him away from BorgWarner Inc., which is an automotive supplier in Michigan.

In 2012, Mr. Wood was awarded $1.4 million worth of restricted stock.

He was, however, awarded a $2.9 million “true-up” payout from Dana because performance shares he forfeited from his previous employer paid out above the 100 percent target level.

Mr. Wood was eligible for the true-up as part of his employment agreement with Dana.

OTHER TOP EARNERS

The following executives were paid at least $2 million in 2012, according to company filings with the U.S. Securities and Exchange Commission. The first number is salary and the second is total compensation.

FORTUNE 500 COMPANIES:

Dana Holding Corp.

  • Aziz Aghili, president of off-highway technologies, $450,000; $3 million
  • Mark Wallace, executive vice president and president of light vehicle technologies, $552,000; $2.1 million
  • William Quigley III, executive vice president and chief financial officer, $500,000; $2.1 million Marathon Petroleum Corp.
  • Garry Peiffer, executive vice president, corporate planning and investor and government relations, $600,000; $6.9 million
  • Richard Bedell, senior vice president, refining, $485,000; $4.8 million
  • Anthony Kenney, president, Speedway LLC, $506,250; $4.4 million
  • Donald Templin, senior vice president and chief financial officer, $556,250; $3.4 million

Owens Corning

  • Arnaud Genis, vice president and president, composite solutions business, $508,920; $3.1 million
  • Charles Dana, vice president and president, building materials group, $575,003; $2.9 million

OTHER COMPANIES:

Health Care REIT

  • Charles Herman, Jr., executive vice president and chief investment officer, $432,000; $3.2 million
  • Scott Estes, executive vice president and chief financial officer, $432,000; $3.1 million
  • Jeffrey Miller, executive vice president, operations, and general counsel, $432,000; $3.1 million
  • John Thomas, former executive vice president medical facilities, $247,292; $2.7 million n Scott Brinker, executive vice president, investments, $322,000; $2.2 million 

Libbey Inc.

  • Richard Reynolds, executive vice president, strategy program management, $491,193; $2.3 million

Earning their pay

When setting executive pay packages, boards look to balance the well-being of the company, its shareholders, and its executives. Companies want to attract and retain top talent, and like to have a reputation of paying a little above their peer group averages. Of course, when everyone tries to pay above the average, that can quickly make the average go higher.

But more than just how much to pay, they also have to think more broadly how they will pay their leaders, said Simon Peck, who is an associate professor of marketing and policy studies at Case Western Reserve University’s Weatherhead School of Management.

“They’re constantly struggling, particularly on the stock side, how do you get that balance right,” Mr. Peck said.

The way many packages are structured, the biggest portion of pay is through the awards of restricted stock or stock options. In some sense, that means executives have that money only on paper. And it further encourages them to be smart risk takers and good stewards of the company going forward.

“A lot of the compensation and wealth of these executives is ultimately tied up in the success of the company,” he said.

Even so, a compensation package reaching high into seven or even eight figures can look gaudy to the average American worker. Is anyone really worth that much money?

Mr. Peck, who studies executive compensation, knows his answer might sound as if he’s a shill for CEOs. But he said being in charge of a large company is an incredibly difficult job.

“I think these CEOs are worth pretty much every dime they get,” Mr. Peck said. “You’re responsible for the fortunes of thousands of people, either directly as employees [or as] suppliers, customers. It’s a very tough job.

“The world today changes very fast, technology changes fast, and you’re making big bets on the future of these organizations,” Mr. Peck said. “It’s a tough job, and they deserve to be compensated, I think.”


Contact Tyrel Linkhorn at: tlinkhorn@theblade.com or 419-724-6134.



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