Maryland CEO salaries pinched again in 2009

Hotelier J.W. Marriott Jr. took the biggest haircut of Maryland CEOs in 2009.

Marriott’s pay package as chief executive of Bethesda-based Marriott International dropped 82 percent to $1.5 million after the company adjusted its compensation practices because of the economy. Bonuses went by the wayside when the company did not meet financial goals and management recommended that the board not give bonuses based on individual performance.

To get an idea of how local CEOs fared in 2009, The Daily Record enlisted executive pay research firm Equilar to compile data reflecting compensation at 18 public companies headquartered in Maryland that filed proxy reports by April 22. Pay fell in nearly every category, aside from base pay and cash incentives, which saw small increases.

Top bosses at most of Maryland’s biggest publicly traded firms took pay cuts in 2009, marking the second year in a row that compensation fell. For an accurate comparison, The Daily Record used pay data for CEOs who were in place in 2008 and 2009.

Overall, pay fell 14 percent. For those CEOs who have held the top job for at least the last three years, pay has fallen 32 percent since 2007.

Average total CEO pay — including those who began in 2009 — dropped to $5.1 million for the year, compared to $5.9 million in 2008.

Bethesda-based defense giant Lockheed Martin Corp. offered its CEO, Robert J. Stevens, the biggest pay package among Maryland CEOs at $20.5 million. His pay was down 10 percent from 2008.

The rocky economic landscape of 2009, investor sentiment and the threat of the government sticking its nose in the business of executive pay, contributed to declining compensation for most Maryland honchos.

“You have an economy that hasn’t done all that well, and you have increased pressure from shareholders. That combination makes it more difficult to pass on large increases,” Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said.

Rage has softened

The rage shareholders displayed when the stock market tumbled in 2008 and early 2009 softened as the economy stopped hemorrhaging jobs and the market rebounded.

“I think as the depth of the recession seems to be easing, you see less concern, but that doesn’t mean it’s gone away,” Elson said. “I think if you see significant increases, you’ll see a return of the concern.”

Political types have heard the outcry from shareholders, and some are working to give them a voice.

One piece of the Senate’s financial reform bill would allow “say on pay” by shareholders. The move would give shareholders a non-binding vote on executive pay, meaning that company boards would have to hear investors’ concerns, but not necessarily act on them.

Michael Faulkender, assistant professor of finance at the University of Maryland, said he questions whether say on pay will have an effect on compensation. Faulkender has studied and written about the makeup of peer groups companies use to benchmark the pay of their executives.

“One of the things that we’re looking at is whether firms change their benchmarking systems in response to say on pay,” he said. “What we’re seeing, and there’s still more work to be done, is that firms go back and manipulate the benchmarking process to keep executive pay high.”

Faulkender said research of past say-on-pay efforts shows that those experiments have not had much benefit.

Nationally, CEOs took pay cuts similar to Maryland bosses’, helping to tamp down investor anger.

National median $7.7M

In a survey Equilar did for The New York Times of 200 chief executives at firms that had at least $5.78 billion in revenue and filed proxies before March 26, median pay fell 13 percent last year to $7.7 million. The median is the midpoint in the pay list, where half of the compensation is lower and half higher.

Don Delves, president of The Delves Group, a Chicago firm that specializes in executive compensation, said shareholder anger has calmed because of declines in pay.

“Frankly, if you look at the reports this year, you’ll see CEO pay came down, and we haven’t had any ridiculous events like AIG paying out tens of billions in bonuses where they’re losing tens of billions of dollars,” he said. “I think the general conclusion this year is maybe this is actually starting to work. Maybe pay is actually tied to performance.”

In the case of Marriott, beyond nixing bonuses, the chief executive took the extra step of declining stock awards offered by the company, which had a target value of $5.7 million. In 2008, stock awards accounted for $5.8 million in his $8.3 million compensation package.

Like Marriott, several Maryland companies made moves to tie pay to company performance.

Instead of paying executives a cash incentive worth 25 percent of their base salaries, Columbia-based Martek Biosciences cut cash incentive pay to 17 percent because product sales suffered, hurting financial performance.

Calling 2009 a “solid but not spectacular year,” Lockheed Martin shaved bonus and non-equity incentive pay. Stevens took a relatively small drop in his discretionary bonus to $3.9 million, from $4.25 million in 2008, and his performance-based bonus was slashed to $5.2 million from $8.6 million.

Restricted by TARP

Sandy Spring Bancorp in Olney had different restrictions on its bonus pay. The bank could not pay cash bonuses to its top five executives because it participated in the federal Troubled Asset Relief Program and has not repaid the government.

TARP participants are also limited in equity grants. The bank was only allowed to grant its executives long-term restricted stock that was worth no more than 33 percent of their total compensation.

The bank’s new CEO, Daniel J. Schrider, made $630,974 in 2009, including stock awards worth $148,504.

Still, some companies had a highly profitable 2009, resulting in bigger paydays for their chief executives.

The best example is Kevin Plank, CEO of Baltimore-based Under Armour, whose pay increased by more than 2,000 percent. Plank decided in 2008 to cut his base pay to $26,000, roughly his salary when he started the firm, and take most of his compensation in bonus pay tied to company performance.

Following a dismal end to 2008, Plank walked away with a compensation package worth $30,002. In 2009, profits increased 22 percent, landing Plank a $748,061 payday.

Discovery Communications, based in Silver Spring, said CEO David M. Zaslav’s compensation increased 48 percent to $11.7 million in 2009, from $7.9 million the year before. Discovery rewarded Zaslav for doubling the company’s net income to $560 million and bringing share value to $30.67 at the end of the year from $14.16 on Jan. 1.

Other winners included Constellation Energy Group Inc. CEO Mayo A. Shattuck III, who oversaw the successful sale of half of the Baltimore-based company’s nuclear business in 2009, and got a 10 percent pay raise to $10.9 million.

Columbia-based Corporate Office Properties Trust’s Randall M. Griffin got a 7 percent pay bump to $4.2 million.