http://online.wsj.com/article/SB123870806394084045.html?mod=yhoofront

Motorola Co-CEO Tops Pay Survey
Jha's $104 Million Compensation, Mostly in Stock, Fell Along With the Market's Plummet

Article
Interactive Graphics
Comments
more in Management »

By JOANN S. LUBLIN, PHRED DVORAK and CARI TUNA

Median pay for chief executives declined last year, but not for all CEOs.

The biggest pay package in The Wall Street Journal's CEO 2008 compensation survey went to an India-born engineer who was granted equity initially valued at $103.5 million for a job he doesn't fully have yet.
Wall Street Journal CEO Pay Survey
Full Survey Results: 200 CEOs' Pay
CEO Pay Sinks Along With Profits
For Some CEOs, the Perks Keep Flowing
CEO Salaries Remain Under Pressure in '09
Discuss: CEO Pay
Complete Coverage: Executive Pay


Overall, the median CEO salary and bonus paid last year by 200 big U.S. companies fell 8.5% to $2.24 million, as a deep recession cut profits and stock prices. Including the awarded value of stock, stock options and other long-term incentives, total direct compensation for chiefs slipped 3.4% to a median of $7.6 million. The survey was conducted for the Journal by Hay Group, a Philadelphia management consultancy.

Motorola Inc. hired Sanjay Jha as its co-CEO last August, intending to have him run its ailing cellphone unit and take it public as a separate company. The spin-off plan is on hold because of the credit crunch and the deteriorating finances of the unit.

To lure Mr. Jha from Qualcomm Inc., where he was the chief operating officer, Motorola granted him restricted stock and stock options. The equity grants provided nearly all of Mr. Jha's total direct compensation of $104 million, more than double the next-highest pay package.

The value of the equity was based on the day of the grant, in line with how companies report to the Securities and Exchange Commission. With the stock market's plummet from last autumn, much of the stock carries far lower values today. For Mr. Jha, based on Thursday's 4 p.m. price of $4.70, all of his stock options are "under water" -- that is, have no value -- at the moment, and his restricted stock is now valued at $17.2 million.

View Interactive


Chartbook

See the top earners and more details from the CEO pay survey.


A Motorola spokeswoman said the company "tied the vast majority of his compensation package to equity awards that are linked to Motorola's stock price and have not yet vested." She noted that Mr. Jha voluntarily reduced his 2009 pay by 25% and agreed to forgo his 2008 cash bonus. "Dr. Jha will realize value from the stock options only when preceded by stock-price appreciation to increase shareholders' value," the spokeswoman said.

The survey includes companies with annual revenue of $5 billion that have filed proxy statements since Oct. 1, 2008. That tends to exclude companies whose fiscal years end between Dec. 31 and July 31. Those companies will be included in the online version of the survey, which is updated periodically through the year.

The runner-up in the Journal's CEO pay survey was Occidental Petroleum Corp. CEO Ray R. Irani, who recorded direct compensation of $49.9 million, primarily reflecting the target value of an incentive award tied to Occidental's financial and stock performance. Mr. Irani also received more than $200 million last year from long-term incentive awards and by exercising stock options granted in prior years.

View Interactive


Interactive Guide

An explanation of how to read proxy statements


"It's outstanding pay for outstanding performance," said Occidental spokesman Richard S. Kline. He said 90% of Mr. Irani's compensation is "at-risk variable pay.... His compensation is based on Oxy's beating and exceeding performance metrics."

Walt Disney Co. CEO Robert A. Iger had total direct compensation of $49.7 million. More than half of that stemmed from three million stock options Mr. Iger was granted in January 2008 as part of a contract extension. The options were valued at $25 million at the time, but Disney shares now trade below their $29.51 exercise price.

"Last year, Disney posted record revenues and earnings per share and outperformed the S&P 500 and its media peers substantially," said Disney spokesman Jonathan Friedland. He said it is misleading to include in Mr. Iger's compensation tally the options granted on his contract renewal, because they'll "be of value only to the extent the company performs and shareholders benefit accordingly."

Citigroup Inc. CEO Vikram S. Pandit also made the top five because of grants of restricted stock and stock options that have plunged in value. Mr. Pandit was named Citigroup CEO in December 2007 and received three million stock options and almost 1.1 million shares of restricted stock in January 2008 as a signing bonus.

At the time, that equity was valued at $37.2 million. Thursday, the options were under water and Mr. Pandit's restricted stock was valued at roughly $3 million.

A Citigroup spokesman said Mr. Pandit's "sign-on stock awards from January 2008 were recently worth about 5% of the original award value.'' In addition, the chief executive "refused to be considered for any bonus, incentive or other retention awards for 2008,'' the spokesman continued. "He has also decided to accept only $1 in salary until the company returns to profitability.''

Louis C. Camilleri, chief executive of Philip Morris International Inc., received direct compensation of $36.4 million, including restricted shares initially valued at $25.4 million. Altria Group Inc., which he previously ran, split its international tobacco business from Philip Morris USA last year. Most of his restricted shares consisted of a special grant for "his instrumental role in successfully completing the corporate restructuring of Altria," Philip Morris International's latest proxy statement said. A Philip Morris spokeswoman declined to comment.

Bloomberg News

Sanjay K. Jha, Motorola's co-CEO


Some CEOs saw their compensation soar last year. The biggest gainer in percentage terms was Navistar International Corp. CEO Daniel C. Ustian, whose compensation rose nearly five-fold to $6.5 million. The increase reflected equity grants after Navistar's stock was relisted last year following an earlier accounting scandal, as well as an annual incentive payment. A Navistar spokesman said the big percentage increase reflected Mr. Ustian's relatively low 2007 compensation and the company's success reaching its performance targets.

The second-biggest gainer in percentage terms was Donald J. Tomnitz of homebuilder D.R. Horton Inc., whose total direct compensation more than tripled, to $5.9 million. The company said in a statement that the big jump reflected the fact that Mr. Tomnitz didn't receive any equity grants in 2007. His 2008 grants, the company said, were all based on Horton's performance compared with industry peers.

The CEOs who saw the biggest declines in percentage terms, excluding CEOs with no compensation, were both bankers: Kenneth D. Lewis of Bank of America Corp. and Richard K. Davis of U.S. Bancorp. Both men were paid only salaries last year, receiving neither bonuses nor equity.

Some CEOs said they accepted the shrunken pay packages. AutoNation Inc. CEO Mike Jackson received no bonus last year, and his total direct compensation fell 29.4% to $2.38 million. Amid falling profits in a depressed industry, "bonuses are not a divine right," Mr. Jackson said. The head of the nation's largest auto-dealership chain beneficially owns about 1.7 million shares, valued at roughly $25.8 million.

As Mr. Jackson's example shows, CEOs typically retain significant wealth, even when their annual pay falls. James M. Bernhard Jr., the longtime CEO of Shaw Group Inc., saw his bonus fall 87.5%, to $264,000, as the engineering and construction company missed certain financial targets. Mr. Bernhard also asked directors not to pay the discretionary portion of his bonus.

Shortly after Shaw's fiscal year ended Aug. 31, however, directors boosted the value of Mr. Bernhard's equity grant for this fiscal year to about $6.7 million, up from $4.7 million in fiscal 2008. In Shaw's proxy statement, directors said they offered the "extraordinary" grant to him and other eligible staffers to help make up for the declining value of previous equity grants.

In all, Mr. Bernhard owns shares and vested options now valued at roughly $17 million, and had accumulated deferred compensation of about $18 million as of Aug. 31, 2008, according to the Shaw proxy.

It was a different story at Genuine Parts Co. Thomas C. Gallagher, CEO of the auto-parts maker, saw his 2008 bonus slide about 35% to $866,716 after pretax profit fell below the target level, the company's proxy said. But Genuine's compensation committee recently decided not to grant equity this year to any employees, including Mr. Gallagher, says Chief Financial Officer Jerry Nix.

Write to Joann S. Lublin at joann.lublin@wsj.com, Phred Dvorak at phred.dvorak@wsj.com and Cari Tuna at cari.tuna@wsj.com