Eyes on the prize
The median change in the three-year total shareholder return for the state’s largest public companies was an increase of 49.7%. Total compensation of their CEOs — who typically make most of their money in long-term stock awards — was up 27.9% in the latest fiscal year, according to Business North Carolina’s annual ranking of executive compensation. That’s a far cry from the days when a boss’ pay seemed to have little relevance to his business’ financial performance.
One reason for the change might be the federal government’s efforts to make executive pay more transparent and give shareholders some voice in compensation plans. In 2007, the Securities and Exchange Commission required companies to tally and report total pay, including stock and option grants that often had gone under the radar. A provision of the Dodd-Frank Act of 2010 requires submitting pay packages to a nonbinding vote of shareholders that considers stock performance, among other factors, in approving or rejecting them.
“This increases the pressure on companies to do an effective job of communicating the longer-term relationship between executive pay and shareholder return,” says Patricia Hale Botoff, senior manager of compensation and benefits consulting in the Raleigh office of Grant Thornton LLP, which compiled this year’s ranking.
Had he not retired last September — the list includes only CEOs on the job at the end of their companies’ fiscal year — Greensboro-based Lorillard Inc.’s Martin Orlowsky would have led the list for the second time in three years. He got a lot more than a gold watch, an estimated $30.7 million, double what he made the previous year. Another cigarette CEO — Susan Ivey of Winston-Salem-based Reynolds American Inc., who announced her retirement last fall and stepped down Feb. 28 — kept the top spot she held on last year’s list.
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