Exec-proofing – Part 2 - Gauging Executive Compensation In The Companies in Our Portfolio

Below is an evaluation of executive compensation of the companies in our portfolio, that uses the ratio of CEO compensation to revenue per employee as discussed in our previous post on this topic. The figures in the spreadsheet are taken from Yahoo Company Profiles, aflcio, and ExecutiveDisclosure.com websites unless otherwise noted:



Portfolio CompanyCEOCEO CompensationRatioComments
Advantage Energy Fund (AAV)Kelly I. Drader$169,641.002.12None.
Aegon N.V. (AEG)Donald J. Shepard$924,642.0011.55This is the most recent figure available for Don Shepard who has since then retired.
Anthracite Capital (AHR)Christopher A. MilnerNANABlackRock manages Anthracite’s operations for a fee making the ratios irrelevant.
TD Ameritrade (AMTD)Joseph H. Moglia$1,000,000.0012.50SEC filings show total compensation including stock options at $9,929,142.
Central Europe & Russia Fund (CEE)Michael G. Clark, Jr.NA NAAs a Closed End Mutual Fund, the figures are irrelevant.
Click Software (CKSW)Moshe Benbassat$265,000.003.31None.
LM Ericsson (ERIC)Carl-Henric Svanberg$3,351,900.0041.89None.
Harvest Energy (HTE)John Zahary$315,844.003.95None.
ICICI Bank (IBN)K.V.Kamath$578,585.007.23None.
IRobot (IRBT)Colin Angle$324,820.004.06None.
Itron Inc. (ITRI)LeRoy D. Nosbaum$650,000.008.13SEC filings show total compensation including stock options at $1,497,575.
Kraft Foods (KFT)Irene B. Rosenfeld$1,375,000.0017.19None.
LDK Solar (LDK)Xiaofeng PengNCNCCEO Xiaofeng Peng is the founder of the company.
MCG Capital (MCGC)Steve Tunney Sr.$500,000.006.25SEC filings show total compensation including stock options at a shocking $2,620,182.00.
Altria (MO)Michael Szymanczyk$1,115,200.0013.94None.
Plum Creek Timber (PCL)Rick R. Holley$800,000.0010.00None.
Pfizer Inc. (PFE)Jeffrey B. Kindler$4,562,500.0057None.
Philip Morris International (PM)Louis C. Camilleri$1,750,000.0021.88SEC filings show total compensation including stock options at an outrageous $33,992,344.
Patni Computers (PTI)Narendra K. Patni$1,282,887.0016Narendra K. Patni is the founder with a significant ownership stake in the company. Compensation source: Business week profile.
Suntech Power (STP)Zhengrong Shi$552,975.006.90Zhengrong Shi is the founder with a considerable ownership stake in the company.
Taiwan Semi (TSM)Rick TsaiNANANone.




The ratios are all over the map, but findings worth mentioning are:
  • Correlation between CEO salaries and the market capitalization of the companies concerned. Though this correlation does not logically hold water, there exists the illusion that companies with higher market caps are capable of “affording” higher salaries. Executive salaries being high have the consequence of fewer earnings for the company, which is one of the downsides of owning large capitalization stocks. Over the long-term the situation should alleviate as companies opt to have salary caps place for the benefit of shareholders.
  • MCG Capital CEO Steve Tunney, Sr. earned almost 25 times the average worker when stock options are included. This is extreme given MCG is a small-cap and is struggling at the moment, presumably due to management missteps.
  • Patni Computers CEO Narendra K. Patni is a founder and owns almost 17% of the company. He also has a very lofty salary earning a basic compensation 16 times the average worker. Simply put, this is avarice. Given the ownership stake, it is obvious that he is looting from his own assets, with the added benefit of being able to seize it all rather than having to share with shareholders. This is in stark contrast to some of the other companies in our portfolio - Click Software, iRobot Inc, LDK Solar, and Suntech power all have founders as the CEO and all of them own significant portions of the company. However, their take home pay is somewhat in line with skill level with the ratios ranging from 3.31 to 6.9.
  • In general, CEO pay is lower in companies based outside the US.

Related Posts:

  1. Exec-proofing – Part 1 – Avoiding Companies That Suffer From Excessive Executive Pay
  2. Exec-proofing – Part 2 - Gauging Executive Compensation In The Companies in Our Portfolio.
Last Updated: 10/2008. 

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