Executive Pay in Northern Colorado - Northern Colorado Business Report - July 4, 2008

NCBR Article



It pays to have the corner office


By Kristen Tatti




July 4, 2008 --
The compensation of Northern Colorado's highest paid public CEO is $1
million more than the next closest competitor but still only a quarter
of the median pay for S&P 500 CEOs.


Tom Gendron, CEO of Woodward Governor Co., was the region's highest
paid public company CEO in 2007. His compensation package - consisting
of salary, incentive pay, options and miscellaneous items - was worth
$2.4 million last year.


A large element of the compensation package, $703,409 to be exact, was
in option awards. The amount is calculated for financial reporting
purposes and does not necessarily reflect an amount the executive takes
home.


Gendron's base pay for 2007 was $572,116 - up 14 percent from the
previous year - but it was his incentive plan compensation that made up
a bulk of the package. Gendron received $595,101 in incentive
compensation and $450,000 for the cash component of a long-term
management incentive plan that was established in 2006.


"The base pay is the foundation of a compensation package. It's usually
impacted by tenure," said Alexander Cwirko-Godycki, research manager
with Equilar, a California-based executive compensation consulting
firm. "Salaries should not be viewed in any way as an indicator of
performance."


Instead, the bonus element is usually designed to reflect short-term performance.


A slowing economy at the end of the year likely had a direct impact on
bonuses. In 2007, S&P 500 CEOs received a median aggregate bonus of
$1,837,080, down 4.9 percent from 2006, according to Equilar data.


"What we saw at the end of '07 was an immediate effect on CEO bonuses,"
he said. 'It was the first time in several years that bonuses were
down."


Cwirko-Godycki added that the downturn only touched certain industries,
such as finance, resulting in bonus declines. The energy industry, for
one, finished the year solidly. Woodward, which manufactures energy
control devices, ended its fiscal year on Sept. 30 with $98.2 million
in profit and a stock price that nearly doubled. The bonus portion of
Gendron's compensation package made up 43 percent of his total pay.


One element missing from Gendron's compensation package is stock
awards. Mike Schablaske, Woodward's director of investor relations,
said that it has been company policy to not offer stock as part of the
compensation package in the recent past.


Cwirko-Godycki said that a trend during the past year for large public
companies has been to offer fewer option awards and more stock awards.
The pressure to move away from option awards began about three years
ago with the approval of a financial accounting standard - FAS 123R.


"Essentially, options went from being free to having a direct cost," he
explained. As most executives would prefer stocks over options, and
options were more dilutive once exercised, many companies made the
switch.





CEO base pay up


Heska Corp. CEO Robert Grieve did not receive stock awards as part of
his compensation package, and his base salary of $377,667 was a huge
part of his $449,112 total compensation.


On the flip side, UQM Technologies Inc. CEO William Rankin received the
lowest base salary of the four Northern Colorado public company top
executives with $311,979. However, he took home the highest stock award
amount with $261,250, and his option awards declined from $140,069
during the last fiscal year to $36,986. Coupled with a $100,000 bonus,
Rankin pulled in a total compensation package worth $731,460 last year.


Advanced Energy Industries Inc. CEO Hans Georg Betz also received stock
options, but the $173,154 award was the smallest part of his pay
package. His base salary of $549,730 was the largest portion of his
$1.4 million compensation.


Equilar's report on CEO compensation reported a 1.3 percent increase
for S&P 500 executive pay. Compensation growth from 2005 to 2006
was about 6 percent.


"Generally speaking, what we saw as a change in pay for CEOs is in line
with the major performance matrices," Cwirko-Godycki said. Even though
revenue, net income and earnings per share were generally positive for
the S&P 500 companies last year, growth had obviously slowed.


Gendron's total compensation package is not comparable year-over-year,
since this is the first reporting period for Woodward applying the new
reporting standards, but his base salary increased 14 percent. Only
UQM's Rankin saw a compensation increase last year, up 4 percent.
Grieve and Betz both saw a year-over-year decline in compensation.


Grieve's total compensation was down about 35 percent from $689,460 in
2006. His base pay increased more than 10 percent, but his incentive
plan compensation was down 76 percent.


It was a similar situation for Betz. His base salary increased 6 percent but incentive plan compensation was down 59 percent.





Board members well compensated


Overall, board members of the region's public companies saw
above-average increases in compensation. An Equilar analysis of
non-employee director compensation at Fortune 500 companies found that
the median value of total board-level compensation for increased by 7.2
percent from 2006 to 2007.


With only a few exceptions, the region's board members saw increases in
compensation ranging from 18 percent to 130 percent. The highest paid
board member was former Woodward CEO John Halbrook, who received
$734,057 for the fiscal year ended Sept. 30. However, $220,065 of that
was payment under a long-term incentive plan put into place while he
still served as CEO.


Another former CEO, Advanced Energy's Doug Schatz, was the next highest
paid board member with $265,644 in compensation for 2007. More than
half his compensation consisted of option awards.


But no matter how it's examined, it pays to be the CEO, or former CEO.