12/8/2010 7:44 PM ET|
The decade's 10 best-paid CEOs
Over 10 years, the top-paid chief execs collected a total of $7.64 billion. But the mixed results for their companies suggest some earned it and some did not.
The growing gap between what CEOs and the rest of us earn makes great fodder for debate, so here's a number to chat about: $7.64 billion. That's what the top 10 best-paid CEOs of the millennium -- OK, the millennium so far -- have earned as a group.
For most, that didn't come in the weekly paycheck. "The key for most of these was gobs of stock options," says Paul Hodgson of GovernanceMetrics International, a global corporate governance research firm.
Many also got generous grants of restricted stock and pricey perks, like use of the company jet for personal trips.
Do they deserve this largesse? You be the judge. In some cases, stock prices soared, which demonstrates the professed purpose of options and restricted stock -- motivating the boss.
"All of these companies dramatically outperformed at some point, or they wouldn't have gotten on the list," says Kevin Murphy of the University of Southern California's Marshall School of Business, who originally compiled this list for The Wall Street Journal.
In other cases, though, stock prices have fallen -- and in the most extreme, the company collapsed on the CEO's watch.
Murphy based his study on pay numbers for 2000-2009; 2010 tallies won't be available until companies report in the New Year. He included salary, gains on options at the time they were exercised, the value of restricted stock at the time it was vested and the value of other forms of pay, including perks. His 10 best-paid CEOs follow.
10. William McGuire, UnitedHealth: $469.3 million
From the start of 2000 through November 2006, UnitedHealth (UNH, news) CEO William McGuire made $420.1 million on stock options. Throw in salary, bonus pay and other compensation, and McGuire's total take during his tenure was $469.3 million, putting him in the No. 10 slot for CEO pay in the last decade.
Shareholders did well, too. UnitedHealth's stock performance during the same period turned $10,000 into $70,708.
But this story has an odd twist.
Despite all the wealth McGuire pocketed legitimately, he got caught up in the options-backdating scandal, in which grant dates were selected retroactively to attain better pricing on options.
"Clearly half a billion dollars wasn't enough," says Hodgson. McGuire ultimately paid back more than $600 million to UnitedHealth, a settlement that covered money earned on options prior to the last decade -- he started as CEO in 1991. In settling the matter, McGuire neither admitted or denied guilt.
9. Henry Silverman, Cendant: $481.2 million
As CEO of Cendant, a travel and real-estate services company, Henry Silverman last decade got a lot more than the normal options, bonus and salary, which often came under attack from pay critics for being four times the industry average. But a big part of his $481.2 million take came in the form of lavish perks, including retirement plan and life insurance payments, a corporate jet and a company car and driver. The value of these perks totaled $89 million from the start of 2000 through August 2006, when Silverman split up the company. Shareholders did not do as well though: An investment of $10,000 over the same period would have dwindled to $5,119.
8. Terry Semel, Yahoo: $489.6 million
Terry Semel joined Yahoo (YHOO, news) in early May 2001 to lead repair efforts at the website and search-engine company after the tech bubble burst. He did a good job and was rewarded handsomely, earning virtually all of his $489.6 million on generous options grants designed to motivate him. Many of those options were priced above the value of Yahoo stock at the time they were granted, an unusual practice, says Hodgson. Premium-priced options are designed to motivate execs even more, at a lower cost to shareholders -- who did quite well under Semel, anyway. Anyone who invested $10,000 in Yahoo when he joined the company had $27,800 by the time he left in June 2007, according to calculations by The Wall Street Journal. In contrast, the Nasdaq gained 19% in the same period.
7. Eugene Isenberg, Nabors Industries: $518 million
Eugene Isenberg managed a phenomenal turnaround of the energy-services company Nabors Industries (NBR, news) after taking over as CEO after a 1987 reorganization. He turned a $35 million market cap into $6.7 billion, and the company has created over 23,000 jobs since he took over, says Nabors.
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