Executive pay can be confusing. Straight cash salary and bonuses are easy enough to understand, but then there are myriad stock grants, plain stock options, premium-priced stock options and stock awards tied to performance goals.
Our pay data comes straight from company information filed with U.S. or Canadian securities regulators. Keep in mind that some of what is reported as income in one year can be deferred for later years. Plastics News does not consider the value of unexercised stock options.
Some basic terms:
Stock option: The executive is allowed to buy stock at the market value of the shares when the option was made, usually several years earlier, and selling immediately for a profit. If the stock has dropped in value since the option was made and the shares are worthless, the options are ``underwater.'' One thing to keep in mind: The figures reported to the government are the value of the shares if sold. The executive may be keeping them for sale later.
Restricted stock award: A stock grant, usually given for remaining with a company for several years and less frequently given with conditions attached for individual or corporate performance. The U.S. government also limits the sale of these stocks. They sometimes are given to executives to make up for other options they may have lost when leaving another company. An executive can keep the entire value of a grant.
Long-term incentive payouts: Either stock or cash, these payments are based on multiyear performance but recorded in one year. A portion is sometimes deferred to future years.
All other cash compensation: This can include money paid into retirement accounts, life insurance, reimbursements for tax payments or other benefits like car and country club dues. It also can be a straight cash payment.
Value realized on shares acquired: The potential profit made on a stock option exercise. If a stock option from several years ago allows the executive to buy the share at $10, and it can be sold when exercised at its current market price of $15, the executive makes a $5 profit per share.
Sources: Towers Perrin (Valhalla, N.Y.) and Plastics News data