Are they worth it? Six Humongous Executive Pay Deals and Why They Were Awarded
28 April 2016 -
Shareholders at oil giant BP rejected the £14.13m pay deal for chief executive Bob Dudley . WPP boss Martin Sorrell is robustly defending his own £70m earnings. Here are some eye-watering executive salary packages, and the arguments made to defend them
Jeremy Darroch, CEO of Sky - £17m ($24m) 2015
The former Procter and Gamble executive collected a bumper £17m in pay and bonuses in the 12 months to the end of June 2015, more than triple his £4.88m salary in the previous year, according to figures published in Sky’s Annual Report 2015.
The Northumberland-born boss enjoyed this substantial boost to his pay packet largely because of a long-term incentive plan (LTIP) that paid out this year and is worth £11.82 m. Linked to Sky’s share price, the LTIP was heavily influenced by Darroch leading Sky to an adjusted pre-tax profit of £1.2bn, an increase of 6% on the previous year; and boosting revenues by 5% to £11.3bn.
With more than a decade of experience working for BskyB, Darroch has been rewarded from leading Sky’s £7bn takeover of its sister operations in Germany and Italy last year. Since the move, 973,000 new customers have been added to Sky’s books, up 45% on the previous year.
Jamie Dimon, CEO of JPMorgan Chase - £18.9m ($27m) 2015
Marking almost a decade in charge of America’s largest bank, Chairman, President and CEO James ‘Jamie’ Dimon received remuneration totalling almost £19m in 2015, including £14m in performance-based stock grants.
JPMorgan achieved record annual profits last year thanks to a vast cost-cutting programme that helped to offset stagnating revenue growth. In particular, lower-level workers have felt the brunt, with JPMorgan cutting staff by 3%, or 6,761 jobs, and reducing its compensation costs by 1% last year.
Furthermore, the New York-based bank has boosted Dimon’s pay by 35% compared to 2014 due to the tying of his package to future performance over a three-year period, after a record share of investors rejected the bank’s compensation practices.
Marissa Mayer, CEO of Yahoo - £29.17million ($42million) 2014
Ranked as America's highest paid female chief executive, Yahoo CEO Marissa Mayer’s total compensation totalled more than £29m in 2014, a sharp rise of 69% compared to the previous year. The vast majority of her pay is tied to Yahoo's stock price, which has more than doubled since Mayer took the reins in the summer of 2012.
Despite failing to turnaround the languishing former tech giant, Mayer has received £54m ($78m) since her high-profile move from competitors Google in 2012, according to stock analytics firm MSCI. Despite Yahoo’s failure to boost ad revenues and grow its newly acquired businesses, Yahoo’s share price is still in better shape than it was four years ago due to its holding in China’s largest e-commerce company, Alibaba.
Therefore, with prospective buyers circling to buy Yahoo and Mayer’s time as chief executive reportedly close to an end, the 40-year-old could earn £40m ($59m) from a buyout, based on the terms of the company’s most recent proxy statement.
Jeff Leiden, CEO of Vertex Pharmaceuticals Inc. - £31.9m ($45.8m) 2014
Since taking over as CEO of the maker of cystic fibrosis drugs in February 2012, Jeff Leiden has led the company through a spike in shares of more than 200%. And he has been amply rewarded for such progress, most notably in 2014, when he received a £31.9m pay cheque – the 40th highest among American executives at publicly traded companies.
According to a filing by the Boston-based company, Leiden was given £10m ($14.9m) in a one-time restricted stock grant for retention during the “critical business transition period from 2015 to 2017”. The corporate governance adviser Institutional Shareholder Services Inc (ISS), which provides advice to asset managers on shareholder votes and class-action securities lawsuits, said the payout was too much.
An ISS statement read: “The total level of CEO pay is excessive and is not contingent upon rigorous performance conditions.”
Steve Ells and Monty Moran, co-CEOs of Chipotle - combined £39.9million ($57.1million) 2014
Chipotle’s rise from small Denver burrito outlet to worldwide fast food chain has made headlines, but news of joint-chief executives Steve Ells and Monty Moran banking £20m($28.9m) and £19m ($28.2m) respectively in 2014 brought the firm some unwanted attention.
Chipotle has delivered strong returns in recent years, with the stock increasing nearly 29% in 2014. However, unions and customers were reportedly outraged by the vast gap in remuneration between those at the top and bottom of the company.
With the average Chipotle front-line worker earning £13,000 ($19,000), the labour-market research firm Glassdoor reported that, in 2014, the CEO-to-worker pay ratio was equivalent to 1522:1.
And such negative reaction may have played a part in co-chief executive Ells’ pay dropping to £9.6m ($13.8m) in 2015 and Moran’s total compensation falling to £9.4m ($13.6m), although a lack of option awards last year seem to be the main cause.
Martin Sorrell, CEO of WPP - £63m ($90m) 2016
Already the highest paid boss in the FTSE 100, Sir Martin Sorrell will receive a £63m ($90m) pay cheque in one of the largest corporate payouts in history from his employer, which he founded in 1985. Added to his base salary and benefits, Sir Martin is set to earn a total of £70m ($100m). Including a share award worth £62.78m and cash in £30.2m, the payout is due to WPP outperforming a basket of 15 competitors and is a part of the advertising and marketing conglomerate’s controversial long-term incentive scheme LEAP, which has subsequently been shut down following shareholder complaints about the large payouts.
However, the LEAP continues to pay out on the company's past performance and Sir Martin is seemingly financially benefiting from WPP’s shares more than doubling in the past five years - taking its market capitalisation to £20.63bn.
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