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Published: 4/24/2005

Record year for area execs

BY HOMER BRICKEY
BLADE SENIOR BUSINESS WRITER

CORPORATE executives in northwest Ohio and southeast Michigan received compensation packages last year totaling $121 million, 20 percent higher than the record set in 1998.

The earlier record resulted from the bull market and generous stock

options generated by mega-mergers.

But last year s record stemmed from big awards of restricted stock,

gains from exercising stock options, and hefty retirement or severance packages for ex-executives.

Leading the local chief executives in total compensation was

Michael Burns, named chief executive officer of Toledo auto parts

supplier Dana Corp. last year. His package was worth $11.7 million,

besting the $11.5 million received by Paul Ormond of Manor Care

Inc., one of the nation s largest nursing home operators.

The 85 executives listed in proxy reports filed with the U.S. Securities

and Exchange Commission by 21 locally based publicly traded

companies took in nearly 30 percent more last year than in the

year before, thanks in part to the special situations.

But in terms of salary alone, the increases were more modest:

an average of 5 percent raises at 13 corporations and 7 percent

at eight banks and thrifts in the region.

Mr. Ormond topped the CEO salary list at nearly $919,000, up 5

percent or almost $45,000 from the year before. Next was Richard

Kinzel of Cedar Fair LP, at $901,000, up 3 percent.

Nationally, salaries and bonuses at 350 major companies jumped

14.5 percent last year, according to the annual survey by Mercer

Human Resource Consulting. American white-collar workers on average got raises of 3.4 percent last year.

That survey put the average large-company CEO s direct compensation at $5.9 million last year, up nearly 41 percent including salary, bonuses, restricted-stock grants, and gains from exercising stock options.

Mr. Ormond s compensation was down 28 percent, but at Owens

Corning, CEO David Brown s was up 41 percent, at $6.8 million, the

third highest locally. Mr. Burns, the local leader, was in his first

year as CEO.

The AFL-CIO s PayWatch Web site took a dim view of CEO-pay

trends nationally. Every year, shareholders and America s workers

learn of new jaw-dropping executive compensation packages that

seem to defy rational explanation, the union proclaims.

Too often, the CEO pay system enriches executives without regard

to their individual performance or realistic contribution to their

company.

Many investors aren t happy either.

Executive pay is certainly a big issue with shareholders, said

Carol Bowie, director of governance research for Washingtonbased

Investor Responsibility Research Center.

Some think it s wildly out of control, [but others] say there s pay for performance.

So far this year, shareholders have filed about 270 executivepay

ballot proposals, on pace with 316 in all of 2004 but much higher

than the number five years ago, she said.

However, locally and nationally many companies can point to good

profits and stock prices as justification for bounteous CEO pay last year.

The Fortune 1,000 firms in this region reported profits totaling

nearly $900 million for 2004, led by Owens-Illinois Inc., with a profit of $236 million versus a loss of nearly $1 billion in 2003.

In addition, two-thirds of the area companies gave their shareholders positive returns in stock price increases and dividends paid. A third of the firms provided total returns of 15 percent or more.

Many top and senior executives were well rewarded for the results: 14 of the 85 officers had total compensation packages of $2 million or more last year.

Highest as a group were five at Manor Care, with compensation packages totaling $24.1 million. Mr. Ormond's included $5.1 million worth of restricted stock, a $1.7 million bonus, and a gain of $2.5 million from the exercise of stock options.

Not far behind were eight executives at Dana who collectively got $22.9 million, and six executives at O-I who received $17.3 million in total.

Dana and O-I each hired new CEOs last year. In his employment contract, Mr. Burns of Dana got a one-time retirement-plan contribution of $5.9 million and a bonus of $1 million. Steven McCracken, of Toledo glass container giant O-I, got restricted stock valued at $2.2 million as part of his $4.3 million package.

The largest bonuses went to officers of OC, Toledo's third-largest firm, which is known for roofing shingles and insulation and is in its fifth year of a Chapter 11 bankruptcy. The group was led by its CEO, who had a $3.1 million bonus.

Altogether, OC officers received bonuses of $7.3 million and long-term incentive payouts totaling $7.5 million. The firm has said its stock likely will be canceled before it emerges from bankruptcy, and its executives get no stock options as a result. The bonuses, it said, were given to try to retain the executives, who otherwise might bolt an employer in bankruptcy.

Other area firms offered large bonuses, including $3.2 million for O-I officers, $1.6 million at Dana, and $1.3 million at Cooper Tire & Rubber Co., a Find-

lay tire maker.

Rising stock prices last year offered many company officials the chance to cash in stock options at a profit. In all, executives at the area's biggest firms had $20 million in gains from such options, including $6.3 million at Manor Care, $5.5 million at Health Care REIT Inc., and $2.3 million at Cooper Tire.

Restricted stock, issued as compensation with the requirement that it be held for a set period, was more popular last year among the big area firms. About $20.5 million was issued, including about $9.5 million worth at Manor Care, $4.4 million at Dana, and $3.5 million at O-I.

Included in the nearly $10 million worth of retirement or severance packages for former-executives was $4.1 million for William Carroll, who had been president of Dana's Automotive Systems Group and acting CEO.

Others getting departing packages were Franco Todisco, who had been president of O-I Europe, $4.2 million; Terry McCormack, who headed Dana's former Automotive Aftermarket Group, nearly $1 million; and E. Eugene Lehman, former president and CEO of United Bancshares Inc., $605,000.

Contact Homer Brickey at

homerbrickey@theblade.com

or 419-724-7129.



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