Wage gap be­tween CEOs, staff in­creases

Dar­den CEO pay jumps to 871 times more than its av­er­age em­ployee

Orlando Sentinel (Sunday) - - FRONT PAGE - By Kyle Arnold

Dar­den Restau­rants CEO Eu­gene Lee made 871 times as much in to­tal com­pen­sa­tion as the me­dian worker at the Or­lando-based com­pany last year af­ter di­rec­tors gave him $7.5 mil­lion in fu­ture stock bonuses and grants aimed at keep­ing him long term.

Two years af­ter re­quire­ments be­gan to make pub­lic com­pa­nies re­port how much their ex­ec­u­tives make com­pared with rank-and­file work­ers, seven out of 19 CEOs of Cen­tral Florida’s pub­licly traded com­pa­nies make at least 100 times as much as their me­dian em­ployee.

The goal of the dis­clo­sure rule was to mit­i­gate CEO pay in­creases, but that hasn’t hap­pened. In­stead soar­ing cor­po­rate prof­its and stock mar­ket per­for­mance have con­tin­ued to in­crease ex­ecu

tive pay, com­pen­sa­tion ex­perts said.

At the same time, the up­roar against CEO pay has qui­eted some­what with low unem­ploy­ment rates, the soar­ing stock mar­ket and re­cent wage gains for typ­i­cal work­ers, one ex­pert said.

Lee was the high­est-paid chief ex­ec­u­tive at Cen­tral Florida’s pub­licly traded com­pa­nies last year, mak­ing $15.8 mil­lion in salary, bonuses, stock and other ben­e­fits. The me­dian worker at the com­pany that owns Olive Gar­den and LongHorn Steak­house and other na­tional res­tau­rant chains made $18,097 for the year.

Dar­den spokesman Rich Jef­fers said the com­pany’s board of di­rec­tors de­cided that the re­ten­tion bonus was needed to keep Lee, who at 58 is re­tire­ment el­i­gi­ble and has presided over record cor­po­rate earn­ings and stock gains. Even though Lee didn’t get the stock grants in 2018, SEC rules still re­quire Dar­den to record it as com­pen­sa­tion for the year it was given.

In all, top ex­ec­u­tives at com­pa­nies that in­clude Dar­den, Publix Tup­per­ware, Gen­cor and oth­ers av­er­aged a 17.5% in­crease in to­tal com­pen­sa­tion dur­ing their most re­cent fis­cal year, led by a $9.4 mil­lion in­crease — or 147% — for the Dar­den CEO. Lee’s bonuses skewed the re­gion’s av­er­age, but even with­out him, lo­cal CEO’s av­er­aged a 4.7% in­crease in to­tal com­pen­sa­tion.

The av­er­age CEO of a pub­licly traded com­pany in the re­gion made $4.6 mil­lion in com­bined salary, bonuses, stock grants and op­tions. The av­er­age an­nual in­come for work­ers in Metro Or­lando in­creased 3.6% from 2017 to 2018 to $46,010 an­nu­ally, ac­cord­ing to the Bureau of La­bor Sta­tis­tics.

Again, the pay-ra­tio rule showed the dis­par­ity be­tween top ex­ec­u­tives and the work­ers un­der them, par­tic­u­larly in Or­lando’s ser­vice-based econ­omy with plenty of theme park and res­tau­rant com­pa­nies. But it has had very lit­tle im­pact in board rooms where CEO pay is de­cided, said Paul McCon­nell, Or­lan­dobased man­ag­ing di­rec­tor of ex­ec­u­tive con­sult­ing firm Board Ad­vi­sory.

“[The CEO pay dis­clo­sure law] was a lot of work and a lot of money ex­pended for ab­so­lutely noth­ing,” he said. “It re­ally hasn’t had much in­flu­ence at all.”

Wil­liam Brown at Mel­bourne-based Har­ris Corp. brought in $14 mil­lion, about $1.5 mil­lion more than the year be­fore. That’s 144 times as much as the me­dian em­ployee makes there, reg­u­la­tory doc­u­ments show.

Mar­riott Va­ca­tion Club’s Stephen Weisz made $7.6 mil­lion in 2018 (212 times as much as the me­dian worker) and fired SeaWorld CEO Joel Manby made $6.8 mil­lion, a $1.3 mil­lion cut from the pre­vi­ous year.

Manby made 711 times as much as the me­dian SeaWorld worker, ac­cord­ing to Or­lando Sen­tinel cal­cu­la­tions. In its fil­ing, SeaWorld cal­cu­lated the salary of for­mer in­terim CEO John Reilly to com­pare ex­ec­u­tive and em­ployee salaries. Reilly, who re­ceived $1.8 mil­lion in 2018, made 184 times the pay of the me­dian worker there, who made $9,580.

Ex­ec­u­tive com­pen­sa­tion fig­ures are gleaned from proxy state­ments from com­pa­nies filed with the U.S. Se­cu­ri­ties and Ex­change Com­mis­sion.

A big­ger fac­tor than the pay dis­clo­sure law has been pres­sure from in­vestors to slow down CEO pay growth by us­ing more so­phis­ti­cated mea­sures to peg com­pen­sa­tion to fi­nan­cial and stock per­for­mance, McCon­nell said.

“Broad CEO com­pen­sa­tion doesn’t re­ally march to the same dy­namic as the rest of the econ­omy,” McCon­nell said. “CEO salary in­creases have been much flat­ter in re­cent years.”

When Clin­ton-era lim­its were passed to limit CEO base salary, com­pen­sa­tion moved to stock op­tions. Now com­pen­sa­tion com­mit­tees use multi-pronged meth­ods based on fi­nan­cial per­for­mance tar­gets, com­par­isons to peer com­pa­nies as well a stock prices.

Dar­den recorded $596 mil­lion in net in­come for its 2018 fis­cal year, the high­est num­ber ever for the com­pany with the ex­cep­tion of the year it sold Red Lob­ster.

“If you look at Dar­den, they have out­stand­ing per­for­mance the last cou­ple of years,” said James Combs, a UCF busi­ness pro­fes­sor who stud­ies ex­ec­u­tive com­pen­sa­tion trends. “A case can be made this his com­pen­sa­tion is ap­pro­pri­ate, at least com­pared to other CEOs.”

A hand­ful of other Cen­tral Florida ex­ec­u­tives were given large re­ten­tion bonuses that were recorded as com­pen­sa­tion this year but won’t be re­al­ized un­til later.

It was also a year of turnover for CEOs at some of the re­gion’s big­gest com­pa­nies, with changes at SeaWorld, Tup­per­ware and Ruth’s Hos­pi­tal­ity un­der vastly dif­fer­ent cir­cum­stances.

Long­time Ruth’s Hos­pi­tal­ity Group leader Michael P. O’Don­nell re­tired as CEO in Au­gust, and the com­pany pro­moted chief op­er­at­ing of­fi­cer Ch­eryl Henry to the top spot. Henry’s base salary in­creased to $650,000 from $410,000, but she was also granted $4.8 mil­lion in stock that she won’t be able to cash in on un­til 2021 to 2023. Her to­tal com­pen­sa­tion was $6.1 mil­lion in 2018.

O’Don­nell, who moved to the ex­ec­u­tive chair­man po­si­tion, made $2.86 mil­lion last year in a par­tial year as

CEO.

“In con­nec­tion with her pro­mo­tion to pres­i­dent & CEO, Ms. Henry re­ceived a one-time, long-term eq­uity grant de­signed to en­sure that she is fo­cused on driv­ing long-term strate­gic value to Ruth’s Hos­pi­tal­ity Group, Inc. (RHGI),” said a state­ment from com­pany spokes­woman Mikella Gal­lagher. “The RHGI Board of Di­rec­tors awarded this grant with the guid­ance of ex­ter­nal ex­pert re­sources and does not in­tend for her reg­u­lar an­nual com­pen­sa­tion to in­clude awards of this mag­ni­tude.”

For 2018, Henry last year made about 193 times what the me­dian Ruth’s Hos­pi­tal­ity em­ployee’s $32,504 salary.

Tup­per­ware Brands also pro­moted its chief op­er­at­ing of­fi­cer Tri­cia Stitzel to the CEO po­si­tion when Rick Go­ings re­tired last year. Stitzel’s com­bined com­pen­sa­tion of $3.6 mil­lion in 2018 was about half of what Go­ings made the year be­fore. Stitzel’s com­pen­sa­tion in­cluded $2.7 mil­lion in stock awards and fu­ture op­tions. Stitzel’s com­pen­sa­tion was 198 times more than the me­dian em­ployee there.

“Pub­lic com­pany boards are ea­ger to give ex­ec­u­tives large stock po­si­tions be­cause it gives them a fi­nan­cial in­cen­tive to im­prove fi­nan­cial and Wall Street per­for­mance,” Combs said. That’s why its com­mon for new CEOs to get large stock grants that ma­ture over four or five years.

But even though CEO com­pen­sa­tion is ris­ing, Combs said it’s mod­er­ate con­sid­er­ing the pos­i­tive econ­omy and grow­ing stock prices.

“The pub­lic out­cry over the last 20 years on CEO pay, it looks like it’s qui­eted down quite a bit,” Combs said. “When the stock mar­ket is up, it hides a lot of sins.”

JOE BURBANK/OR­LANDO SEN­TINEL

Av­er­age CEO com­pen­sa­tion for Cen­tral Florida com­pa­nies is up 17.5 per­cent over the last year, led by a $9.4 mil­lion raise for Dar­den CEO Eu­gene Lee, who now brings in $15.7 mil­lion in salary and stocks.

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