WASHINGTON – Income for Maryland’s top corporate bosses jumped 75 percent between fiscal 1995 and 1996, driven by hefty stock options and bonuses, according to Securities and Exchange Commission records.
The chief executive officers of the state’s 25 richest public corporations made almost $80 million in salary, bonuses, stock options and benefits in fiscal 1996, an average of $3.08 million each.
In the previous fiscal year, CEO compensation for the same 25 corporations totaled $45.63 million, according to annual reports the companies filed with the SEC.
Even when stock options are discounted, the CEOs earned 42 percent more in 1996 than in 1995.
Only eight of the 26 executives — Sylvan Learning Systems Inc. has two co-CEOs — earned less than $1 million last year, and four corporations actually paid less in 1996 than in 1995.
Total compensation ranged from $256,934 for Thomas K. Ferguson of Mason-Dixon Bancshares in Westminster to $12.12 million for Terence C. Golden, who was hired in 1995 to head Host Marriott Corp. in Bethesda. A performance bonus of more than $10.48 million boosted Golden into the top spot.
The 25 companies were identified by Capital News Service based on their market value as reported on the Bloomberg Maryland Index of large companies in the state. Chris Bohner, who monitors executive compensation for the AFL-CIO, said the Maryland numbers are in line with numbers from top companies nationwide.
“It says a lot about how our economy is working and the inequity of our economy,” Bohner said. Employees “have backbreaking labor and they have long days as well, but you don’t see the same type of increase in compensation.”
Most of the businesses said in their SEC filings that executive compensation is based on the performance of the company, and stock prices for many of the 25 Maryland-based firms were significantly higher in 1996 than in 1995.
But executive pay did not always mirror company performance. Black & Decker Corp.’s net earnings grew 2.5 percent in 1996, while CEO Nolan D. Archibald’s total compensation jumped 79 percent.
Archibald benefited from a change in performance bonus formula that increased rewards for executives, said company spokeswoman Barbara Lucas.
“The board changed the annual incentive formula for the next year without knowing what the results might be,” Lucas said. “In the worst case, you set these kind of standards to say if you’re going to replace somebody, bring somebody else in, what would you have to pay them?”
Allegheny Power System Inc., which provides electricity in Western Maryland as well as parts of four other states, laid off about 1,000 employees in 1996. CEO Alan J. Noia’s compensation increased 77 percent, mostly through bonuses and benefits.
“Prudent management of your company is what keeps electric rates reasonable,” said Allegheny spokeswoman Midge Teahan. “If you want to hire the cheapest guy out there, is that who you want running a company that you are buying electricity from? You want an individual with skills, market savvy, with market expertise to hold the company together and move it forward.”
Base salaries accounted for only 13 percent of the 26 executives’ total compensation in 1996.
Charles P. McCormick Jr., the CEO of Baltimore County-based McCormick & Company Inc. in 1996, did not receive any salary but still made almost $1 million in benefits, bonuses and stock option grants.
Robert N. Elkins of Integrated Health Services Inc. saw his $750,000 salary bolstered by a $2.5 million bonus and $6.49 million worth of stock options, the largest stock option grant of any of the CEOs. Elkins more than quadrupled his compensation between 1995 and 1996.
Stock options allow executives to purchase shares in the company at a future date at a predetermined price. If the stock falls below that price, the option is worthless, but if it gains, the executive can pocket the difference between the market price and the option price.
Companies include options as current compensation in their annual reports, estimating their future value using one of two allowable formulas on their SEC filings.
Of the executives who earned less in 1996, two were coming off years in which they had received extraordinary benefits or bonuses.
Lockheed Martin Corp. CEO Norman R. Augustine’s 1996 compensation of $8.38 million was 35 percent lower than his 1995 earnings, which were boosted by $5.5 million from a company savings payout and a $2.75 million long-term performance bonus.
Similarly, Ryland Group CEO R. Chad Dreier received a greater chunk from a savings plan in 1995 than in 1996, when his overall compensation fell 2 percent.
The 37 percent pay drop for Mercantile Bankshares Corp. CEO H. Furlong Baldwin was largely due to a lower 1996 performance bonus that reflected slowing company growth, said David Borowy, the company’s investor relations officer.
Companies do not have to file the executive compensation data for one fiscal year until the end of the next fiscal year. Fiscal 1997 reports are currently available for only a few of the 25 Maryland corporations. Figures from 1996 are used here for consistency.