Stock options, long-term stock payment, long-term incentives, insurance policies, salary deferment plans-most performance-related vehicles-are reducing salary to a compensation footnote, according to executive pay data on Pages S-13 and S-16 of this report.
Take what Microsoft Corp. offered Robert J. Herbold to become its exec VP-chief operating officer. Mr. Herbold, then senior VP-advertising and information services at Procter & Gamble Co., was romanced with a package that included:
A salary of $450,000; bonus, $200,000; whole-life policy, $650,000; term-life policy, $1.35 million; signature bonus ("just sign here"), $250,000; annual signature payments of $250,000 to continue for three consecutive years; 325,000 stock options for a potential $11.3 million if annual appreciation is 5% by the time the options come due, or $28.2 million if the annual rise is 10%.
Microsoft's proxy calls this "an attractive compensation package."
Even salary has gained its own sea of variables.
Grey Advertising sheltered part of the $2.06 million salary and all the $591,667 bonus for Edward H. Meyer, chairman, president and CEO, placing the sum into a deferred compensation trust. Such deferrals allow a company to preserve the tax deductibility of executive compensation since the tax law basically denies tax deductions to publicly held corporations for any annual compensation in excess of $1 million.
Mr. Meyer, like a host of others, does not pay taxes on the deferred payments until they are claimed, and when they are claimed, the volume has grown from collecting interest in high-yield accounts. John F. Welch Jr., chairman-CEO at General Electric Co., for example, deferred $1 million of his $2 million '95 salary.
LINKED TO INSURANCE
Deferral programs increasingly are being tied to insurance policies offering savings vehicles. The buildup of investment gains in such policies is tax free. The company takes out a policy, names itself beneficiary, pays the premiums, may borrow against the policy for deferral payouts and shares in death benefits without owing taxes.
Jill Barad, president-chief operating officer at Mattel Inc. and highest-paid woman executive on the charts, drew $2.26 million of her compensation as payment for stock appreciation rights. SARs entitle a participant to receive the same economic value that would have been derived from exercise of a stock option.
George M.C. Fisher, Eastman Kodak chairman, president and CEO, gave up 80,000 Motorola Corp. stock options when he jumped to Kodak in 1993.
Part of his new contract included two loans of a total $8.3 million. One loan, for $4.3 million, compensated him for forfeiting the options. The loan package is being forgiven incrementally, including $2 million in '95. Just another form of "salary."