The big bucks that come with the executive suite weren't so big in 2003.
The paychecks were quite healthy, of course: Average pay of the top 100 in the Plastics News executive compensation score card was about $890,000.
It's just that they weren't as good as in 2002, when the average executive took home about $1 million.
Blame it on a tough economy for manufacturers, sky-high resin prices that cut into earnings, anxious shareholders and post-Enron scrutiny of executive paychecks. Many companies didn't meet their profit expectations, and chief executive officers saw pay drop, mainly because their cash bonuses were down. The average figures do not include pay for Magna International Inc. For and explanation, see the sidebar on Page 22.
Newell Rubbermaid Inc.'s Joseph Galli, for example, saw his cash bonus drop from $1 million in 2002 to $234,000 last year. Bemis Co. Inc.'s Jeff Curler, another perennial chart-topper, didn't get any cash bonus in 2003, after getting more than $1 million the year before.
It was the same at compounder A. Schulman Inc. of Fairlawn, Ohio. CEO Terry Haines saw his bonus cut in half to $180,000 because the company did not meet final targets. Haines still collected $180,000 because he met nonfinancial performance goals.
That's the norm: Cash bonuses for the execs fell markedly on average, from $340,000 in 2002 to $210,000 last year.
``A lot of companies in the plastics processing world have suffered tough times,'' said James Aslaksen, a plastics industry executive recruiter and Korn Ferry International's global practice leader in performance materials. ``Boards are tougher on pay, stockholders are looking for performance.''
Of course, it was not all downhill. Executives still found other ways to boost pay.
The average salary of the 100 best-paid corporate leaders in our survey jumped 8.9 percent in 2003, to $383,000. Salary and nonunion hourly workers, by comparison, saw an average salary increase of just over 3 percent last year, according to a survey from consulting firm Hewitt Associates.
Stephen Myers, CEO of Myers Industries Inc., got a 40 percent raise, to $346,000. Phillip Friedman, the top executive at PVC Container Corp., has seen his salary go from $180,000 in 2001 to $250,000 last year.
And Rubbermaid's Joe Galli saw his base salary leap by $160,000, to $1.17 million.
Some did well
A few executives enjoyed some of their best years ever.
Two corporate chiefs at small medically oriented plastic processors, Merit Medical Systems Inc. and Utah Medical Products Inc., ranked in the top 10, as their stock prices rocketed and the CEOs took home paychecks common at companies many times their size.
Merit's Fred Lampropoulos cashed in about $2.9 million worth of stock last year, making him the highest-paid executive on our list, outside of behemoth Magna International Inc.
(He apparently needed it - according to Utah press reports, Lampropoulos spent more than $2 million of his own money in a bid to be the governor of Utah.)
Kevin Cornwell, CEO of Utah Medical, cashed in stock worth $2.2 million, giving him a 2003 payday of $2.7 million.
UM's board has not been shy about heaping rewards on Cornwell - his cash bonus amounted to 47 percent of all bonuses given to UM employees last year, and he got an extra $280,000 bonus in January when the company won a $31 million patent infringement judgement against Tyco.
They and a few other executives, like Spartech Corp.'s Brad Buechler and pretty much the entire executive suite at auto supplier Magna, had major stock payouts. But they were very much the exceptions: The era of supersized stock payouts common in the mid- and late 1990s did not return.
Over the past few years, stocks for publicly traded plastics processors haven't fared well.
$100 invested in a hypothetical fund of Nasdaq stocks in plastics processing at the end of 1998, for example, would have declined steadily to $60 by December 2003, according to figures in the proxy for UFP Technologies Inc.
So it's not surprising that pay for plastics processing executives, which historically has been dependent on stock options, would drop.
That puts the plastics executives in a minority with their counterparts across the business world, though: Pay for corporate leaders across all industries actually rose 9 percent last year, according to Business Week magazine.
Poor stock performance left many plastics industry executives in 2003 sitting on piles of worthless stock options last year.
Royal Group Technologies Ltd.'s Vic De Zen, for example, could exercise options on almost 1.4 million shares, but they were worthless because the company stock price had dropped so dramatically.
And others, like Collins & Aikman Corp., dealt with the bottom falling out of their stock price by repricing options.
Others responded to the down economy by taking some unusual measures. Electronics injection molder Key Tronic Corp. adopted a retention bonus - money its top execs get for remaining with the company for 2003, 2004 and 2005.
SEC documents said CEO Jack Oehlke, for example, was eligible for a retention bonus of $211,000 last year, $244,000 this year and $276,000 in 2005.
Last year, he earned a bonus of $155,000 based on company performance, but that got boosted by another $56,000 because of the retention bonus, up to the limit of $211,000. Company officials did not respond to an interview request.
Several of the larger companies in our survey are moving away from stock options, mirroring what some experts say is a national trend in executive pay. The companies are putting more of executive compensation into stock grants.
Tredegar Corp., Spartech, Royal and Bemis all adopted plans that rely more on grants, which proponents say are less volatile as a compensation tool than options. Some acted in anticipation of rules requiring them to report stock options as an expense on income statements.
Tredegar said it awarded stock grants to senior executives this year, and put in accelerated vesting clauses that give executives ownership of the grants sooner, if the company meets performance targets. The company still gives stock options to rank-and-file employees.
Tredegar said in SEC filings that it favors grants over options for senior executives because they are the ``best balance between performance and retention.''
``Restricted stock more closely aligns executives and shareholders through ownership, not potential ownership [of stock options],'' said Mitzi Reynolds, director of investor relations at the Richmond, Va., company. ``It has a perceived value that is less sensitive to short-term changes in price.''
It's part of a trend, Korn Ferry's Aslaksen said, of putting tougher metrics on compensation, particularly tying compensation to specific goals.
``It's shifting compensation more from opinion to fact,'' he said. ``Performance is being paid, nonperformance is taking a hit.''
In the mind of one compensation watchdog, however, the move away from options is an implicit acknowledgement that they don't work as well as advertised.
Options are not a good way to give executives ownership stakes because research has demonstrated that there is too much temptation to manipulate stock value to maximize an executive's personal gain, said Beth Young, a senior research associate at The Corporate Library in Portland, Maine.
``Options are not a proxy for stock ownership,'' she said. ``They [lead to] perhaps a preoccupation with stock price. You don't have a downside. You can let your options expire and you haven't lost anything.''
Young is not entirely anti-option. She said that to some extent stock options have gotten a bum rap because they have been unfairly tainted by association with other pay abuses.
But they remain tricky as a compensation tool, she said. If companies use them, they should combine them with a requirement that executives hold some amount of stock in the company, ``to make sure that we're not just cycling cash through these people.''
Paydays & exit doors
The biggest paydays again this year belong to executives at automobile systems manufacturer Magna International, with four of the top five spots. (With $15.3 billion in annual sales, the company is by far the largest in our ranking, about twice the size of No. 2 Newell Rubbermaid.)
Magna has a very unusual pay structure, with the lowest base salaries of almost any company in our survey, typically around $100,000 a year.
The company said it wants more of its executives' pay to be at-risk, or dependent on performance. It often pays much larger bonuses and has larger stock awards than others.
That was the case last year. Executive Vice Chairman Siegfried Wolf, who was the best-paid executive on our list, took home $13.3 million, with a cash bonus of $4.2 million, another $4.7 million in restricted stock, and a special bonus of about $3.2 million.
Magna's pay system is complicated, and has been criticized by some shareholders: A consulting firm associated with Chairman Frank Stronach received $34.5 million last year, which would have put him at the top of the list. But Plastics News chose not to count that as direct compensation.
Of course, poor company performance also seemed to push some executives out the door.
Marshall Cogan, founder and longtime chairman of polyurethane foam manufacturer Foamex International Inc., left the company in February. While the company performance improved in 2003, longer-term it's been a straggler: $100 invested in 1998 would have been worth just $40 last year.
A company statement said Cogan left ``by mutual agreement with the board'' and received a $1.4 million severance deal. Last month he became chairman of plastic pallet maker PalWeb Corp. in Tulsa.
Other executives also exited in 2003: Collins & Aikman Corp. CEO Jerry Mosingo left after about a year on the job, with a severance package worth $1.3 million, plus company car and health benefits.
Consultants said executive pay could rise a little in 2004 as the economy improves, but they cautioned that economic conditions make it hard to predict.
``The economy is very shaky,'' said Nick Fountas, managing director with JLI Boston, a plastics industry recruiting firm. ``The horizon is clouded up with all sorts of stuff going on - weak business, ownership changes, sudden changes in management and institutional investors reassessing.''