Several lists of the highest paid CEOs in America are published each year mostly by the business media and shareholder groups. All are based on proxy statements. Long before the lists are published, the boards of directors of these companies try to justify the compensation packages for shareholders. Investors often are skeptical of these defenses, and they should be. It is rare, but not impossible, to show that a chief executive deserves $50 million, or even $100 million a year.
Based on the annual CEO Pay Survey 2011 by GMI, 24/7 Wall St. identified the 10 highest paid CEOs. We then analyzed company performance of the highest paid CEOs to determine which pay packages were worth the investment.
Such a review about management compensation is by its nature subjective and different from a board’s reasoning. A board may take into account the long-term record of a CEO who has held his or her job for several years. The board might set a pay package based on an extraordinary year. The directors also may pay a CEO well just before he or she retires. 24/7 Wall St. has downplayed each of these factors, but has not eliminated them. Our judgment of “fairness” is based on what shareholders received in the year as the CEO’s compensation year. Our primary measurements are revenue growth, earnings growth and stock price change.
This is the 24/7 Wall St. list of the 10 highest paid CEOs for 2010 and an analysis of whether their compensations were worth the payments in terms of shareholder returns. All compensation considerations used to set pay, which include board of director criteria from each company, come from SEC-filed proxies.
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10. Mario J. Gabelli
> Company: GAMCO Investors (NYSE: GBL)
> Total 2010 compensation: $56.6 Million
GAMCO did not do very well for investors in 2010. The price of the company’s shares was flat, considerably underperforming the S&P 500 increase of 14% that year. The company manages mutual funds and other investments for private individuals and public enterprises. GAMCO had a relatively good year in terms of revenue and earnings growth. Revenue rose from $218 million in 2009 to $280 million in 2010. EPS was up from $2.03 to $2.55. Based on the relatively small size of the company and GAMCO’s performance, however, Gabelli is overpaid.
Source: 24/7 Wall St.
9. Ronald A. Williams
> Company: Aetna (NYSE: AET)
> Total 2010 compensation: $57.8 million
Aetna’s shares were down 7% in 2010, underperforming the S&P 500 by a large margin. Williams’ pay was based on several factors, none of which was stock price. EPS, pre-tax operating margins and an increase in the dividend were the major measures of his performance, according to the board. The board can make the case, persuasively, that the insurance firm had a good year financially in 2010. The company’s EPS rose from $2.84 in 2009 to $4.18 last year, even though revenue fell slightly from $28.3 billion to $27.6 billion. Williams retired in 2011. The board gave Williams a relatively reasonable gift as he left, at least based on 2010 performance.
Source: 24/7 Wall St.
8. Michael D. Fascitelli
> Company: Vornado Realty Trust (NYSE: VNO)
> Total 2010 compensation: $64.4 million
Vornado’s shares significantly outperformed the S&P 500 in 2010, up over 17% for the year. The board relies on EBITDA and total return to shareholders to set pay. Both improved in 2010 compared to 2009 as EBITDA rose from $1.7 billion to $2.2 billion. Vornado produced strong financials on a GAAP basis as well. Net income per share rose to $3.24 in 2010 from $0.28 the year before. Revenue rose from $2.7 billion to $2.8 billion. Fascitelli is a CEO who earned what he made.
Source: 24/7 Wall St.
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