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|Articles - October 2012|
|Monday, September 24, 2012|
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Median pay for all 20 Oregon CEOs has remained less than a third of the S&P 500 CEO pay.
That median pay rose from $2.1 million in 2007 to $3.0 million in 2011. Equilar produces an annual S&P 500 CEO Pay Study, which shows that prior to the recession in 2007, median S&P 500 CEO pay was approximately $8.7 million. It fell the next two years; then, as stock markets recovered, it roared back to $9.6 million in 2011. Nike, Precision Castparts and FLIR are currently the only Oregon companies included in the S&P 500 index.
Nike CEO Mark Parker’s total pay was more than a third of the $103 million paid to our CEO group.
Parker earned more than $35 million for the year ended in May 2012. Two-thirds of Parker’s pay was stock awards, which could rise or fall in value by the time he can exercise them. He received no bonus and his salary was only $1.6 million.
Looking at Nike’s performance, net income only declined once, in 2009, and was at an all-time high of $2.2 billion for 2012. Nike’s stock price is also flying high, elevating the grant-date value of Parker’s equity.
CEO pay and company performance seesawed wildly during the past five years‚ mostly in synch‚ but sometimes not.
Nationally, S&P 500 CEOs saw their median compensation decline in 2009, then rise the next two years, roughly in line with company net income, which shifted higher and lower than pay.
Likewise, average CEO pay for the top 19 companies in Oregon (excluding Nike) fell in 2009, then rose the next two years, increasing an average of 11% per year. Company net income followed the same — more extreme — pattern but only rose an average of 2% per year.
Individual companies, though, often strayed from company earnings. Parker’s percentage change in pay rose three times as high as net income in 2010, fell in 2011 when earnings continued to grow, then shot up 219% in 2012, while net income grew just 4%.
As a share of pay‚ salary has been in retreat for decades.
Don Lindner, executive compensation practice leader for WorldatWork, a nonprofit association focused on compensation education, says that base pay used to comprise about 50% to 60% of CEO compensation until the 1980s.
Then came IRS Section 162(m) in 1992, stipulating that corporations could deduct no more than $1 million of executives’ non-performance pay. To avoid tax liability, annual bonuses rose dramatically, says Lindner, and mega-grants of stock and options were invented, raising the prominence of equity awards. Regulators effectively had placed a limit on salary, but the unintended consequence was to rapidly increase total compensation, albeit in a leveraged form.
Among Oregon’s top 20 CEOs, average salary grew 5% per year since 2007, but as a share of total compensation it declined from 22% in 2007 to 14% in 2011. Salary accounted for just 10% of the S&P 500 CEOs’ 2011 pay. This decline of salary’s share is exacerbated by rising equity awards — much riskier and less liquid than cash.
“To replace base pay, which is a sure thing, with at-risk pay like options, you have to give them a whole bunch more [stock and options], because they’re worth less,” says Lindner.
Thursday, December 18, 2014
BY LINDA BAKER
2014 was a year of wild contradictions, fast-paced growth and unexpected revelations.
Wednesday, October 22, 2014
Peter Lizotte at ACME Business Solutions and Roger Busse at Pacific Continental Bank share their favorite reads.
Wednesday, October 22, 2014
We didn’t intend this issue to have an election season theme. But politics has a way of seeping into the cracks and fissures.
Friday, October 31, 2014
BY LINDA BAKER | OB EDITOR
Why are there so few transportation startups in Portland? The city’s leadership in bike, transit and pedestrian transportation has been well-documented. But that was then — when government and nonprofits paved the way for a new, less auto centric way of life.
Wednesday, October 22, 2014
BY KIM MOORE
Businesses spend billions of dollars each year trying to influence political decision makers by piling money into campaigns.
Thursday, December 11, 2014
There’s a fascinating article in the December issue of the Harvard Business Review about a profound power shift taking place in business and society. It’s a long read, but the gist revolves around the tension between “old power” and “new power” as a driver of transformation. Here’s an excerpt:
The authors, Henry Timms and Jeremy Heimans, don’t necessarily favor one form of power over another but merely outline how power is transitioning, and how companies can take advantage of these changes to strengthen their positions in the marketplace.
Our Powerbook issue might be viewed as a case study in the new-power transition. This annual book of lists provides information on leading businesses, nonprofits and universities in the state. Most of the featured companies are entrenched power players now pursuing more flexible and less hierarchical approaches to doing business. Law firms, for example, are adopting new technologies and fee structures to make legal services more accessible and affordable.
This month we also take a look at a controversial new U.S. Securities and Exchange Commission rule requiring public companies to disclose the median pay of workers, as well as the ratio between CEO and median-worker pay.
Part of the 2010 Dodd-Frank financial reform law, the rule will compel public companies to be more open about employee compensation, with the assumption that greater transparency will improve corporate performance and, perhaps, help address one of the major challenges of our time: income inequality.
New power is not only about strategy and tactics, the Harvard Business Review authors say. “The ultimate questions are ethical. The big question is whether new power can genuinely serve the common good and confront society’s most intractable problems.”
That sounds like a call to arms. Or a New Year’s resolution. Old power or new, the goals are the same: to be a force for positive change in the world. Happy 2015!
Saturday, December 13, 2014
Checking in with the managing director of Arnerich Massena.
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Is your business ready to join us in the call for action? This opening panel includes Oregon businesses who will discuss why they signed the Oregon Climate Declaration, the investments they are making to reduce carbon emissions, and how their actions are affecting their companies.
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Port of Morrow's business-ready attitude has a surprising global impact.
Through its support of the arts, the Cultural Trust is strengthening the business community.
Heed the morals of these seminal holiday stories in your everyday life.
Amy will practice in the firm's Business, Real Estate, and Tax practice groups.
While the Bend City Council ultimately upheld the approval which enables OSU-Cascades to move forward with the 10 acre site, it did also thoughtfully consider the nature of its code requirements, resident concerns and OSU-Cascade’s efforts and suggestions and crafted conditions of approval to address potential impacts of the site in the area.