Published on March 12, 2008
Executive Compensation: Executive Compensation Amy Sachs Kellie MacMullan Meagan Mucciarone Paul Haines Highest Paid CEO’s: Highest Paid CEO’s Definition: Definition Governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long term incentive compensation, such as stock options. Strategic Management: Competitiveness and Globalization Executive Compensation: Executive Compensation Looking at: Pay Bonuses Performance Company makeup Stage Stores: Company and CEO Interview with CEO: Interview with CEO Jim Scarborough, President, CEO, and Chairman of the Board—Stage Stores, Inc Stage Stores: Stage Stores Stage Stores, Inc Retail Industry 3 Department Stores: Bealls, Palais Royal, Stage “Think Big in Small Town America” Headquarters in Houston, TX 362 Stores, mainly South Central Over $1 Billion/year Jim Scarborough: Jim Scarborough CEO, President and Chairmen of Stage Stores for over 3 years 53 years old Previously CEO at: BusyBody-Fitness equipment Seattle Lighting-Lighting Fixture Executive Compensation Basics: Executive Compensation Basics Executives-Who are they? Key Employees in company CEO, CFO, COO President, VPs, Directors What is Executive Compensation?: What is Executive Compensation? Core Compensation= Base Pay & Bonus Less than $1,000,000 due to tax implications Short term Incentives Stock Options Fringe Compensation Issues With Compensation Packages: Issues With Compensation Packages If CEO holds over 1% of stock, hard to fire Bonuses often cause oversight of long term goals Jim Scarborough’s Compensation Package: Jim Scarborough’s Compensation Package Pay, bonuses Long-term Company matches, defers income Stock options Car Allowance Extra Discount Life Insurance 100% paid medical plans No deductible or premium Who Sets Executive Comp?: Who Sets Executive Comp? Different for Each Company Compensation Consultants Compensation Committees Board of Directors Shareholders Board of Directors: Board of Directors Is it fair for Board of Directors to determine salary? “Boards are often quite friendly with the CEOs and find it hard to impose large decreases in compensation on their friends” Boards should usually be made of outsiders to avoid much conflict Executive Compensation and Shareholder Value How Stage Does It: How Stage Does It Compensation Committee Info from Hay Associates & Hewitt Associates Pay grades Philosophy: to pay at 75th percentile Brought to Board for Ratification Let’s Look at Salaries…: Let’s Look at Salaries… Are CEOs paid based on performance? Are CEOs paid based on industry? Are CEOs paid based on company size? Comparing Industry Salaries: Comparing Industry Salaries Retail Industry GAP NORDSTROM STAGE STORES Financial Service Industry MERRILL LYNCH JP MORGAN CHASE JANUS MUTUAL FUNDS Slide17: GAP INC TWO FOLSOM STREET SAN FRANCISCO, CA (415) 952-4400 Executive Comp Summary Slide18: NORDSTROM INC 1617 SIXTH AVENUE SUITE 500 SEATTLE, WA (206) 628-2111 Executive Comp Summary Slide19: STAGE STORES INC 10201 MAIN ST 5847 SAN FELIPE ST STE 2600 HOUSTON, TX (713) 667-5601 Executive Comp Summary Slide20: MERRILL LYNCH & CO INC 4 WORLD FINANCIAL CTR NEW YORK, NY (212) 449-1000 Executive Comp Summary Slide21: J P MORGAN CHASE & CO 270 PARK AVE 39TH FL NEW YORK, NY (212) 270-6000 Executive Comp Summary Slide22: JANUS CAPITAL GROUP INC 100 FILLMORE STREET DENVER, CO (303) 333-3863 Executive Comp Summary As You Can See…: As You Can See… Within each industry: Size of company does not reflect salaries of CEOs Difference between industries: Industries reflect a large pay difference to CEOs What Do You Think:Should company size or industry type determine pay?: What Do You Think: Should company size or industry type determine pay? Does Salary=High Performance?: Does Salary=High Performance? CEO Compensation: CEO Compensation Citigroup Share price down 25%, Stock bonus went from 17 million to 17.9 million Bear Stearns profits rose, pay doubled to $19.6 million E*Trade Group resigned after taking $80 million pay package After pressure from investors Delta CEO gave up $9.1 in bonuses Reasoning: Reasoning Board of Directors feel exec’s deserve high salary Doing good job in hard times Doing more work to manage in a bad economy How Should Executives Be Paid?: How Should Executives Be Paid? Strictly performance based? Because of responsibility ok to pay even when not performing well? What do you think? Conclusion: Conclusion Executive Compensation is different Much more than just salary Always a debatable topic Ever-growing issue with the current economy Questions?: Questions?