This Years Rich List

Posted by Marc Hodak on November 15, 2010 under Executive compensation, Reporting on pay, Unintended consequences | Be the First to Comment

Greg Maffei comes out on top of the sweepstakes he unwittingly entered with a reported $87 million in “Total Direct Compensation.”  And the corporate governance critics will be ticked off if any of that consists of company-paid security for him or his now-targeted family.

Ever since regulators decided that public display of how much certain people make was a good idea, we’ve been getting “Best Paid” lists.  The SEC has gone through conniptions to get the display right, but we are still cursed by the muddle reporting that arises out of muddled thinking and the muddled board reaction to it.

The WSJ tries to guide the wonks in a “How to Read a Proxy” sidebar highlighting the “Summary Compensation Table” (SCT), from which the WSJ rankings are basically derived.  As the WSJ helpfully points out with regards to two of the seven columns in that expensive proxy real estate:

[The term “bonus”] doesn’t include everything normally considered a bonus.  Also look under “non-equity incentive plan compensation.”

Why is this so complex?  Because before looking at a bunch numbers, it helps to know what you’re really looking for.

If you’re looking for a breakdown of fixed versus variable compensation, that’s different from trying to distinguish cash versus equity compensation, which is different from trying to distinguish grant date versus realized pay, or in-service versus post-employment pay.  The current SCT is a mongrel attempt to do all of these at the same time, while trying to keep it to seven columns.

The WSJ article methodology, developed by the venerable Hay Group that has done so much to bureaucratize corporate America, is SCT lite.  So, this year Greg Maffei, who got an up-front, multi-year grant of about $75 million worth of options in 2009 (last year, I know, but that’s just another complexity), which he gets only if he sticks around through 2015, looks much better paid than someone like Sanjay Jha, who got less than $4 million last year, but who got over $100 million the year before when he was awarded a multi-year grant of equity.  So, who was actually paid more?

It’s enough to make someone who really cares about compensation for reasons other than prurient interest tear out their hair and scream, “Why can’t you just pay them a salary and bonus like the rest of the managerial universe, get rid of all the complicated crap!?”  That’s what it looked like before the tax, accounting, and regulatory authorities decided to weigh in with comp rules designed to both limit total pay and improve transparency.  And that, folks, is not a coincidence.