It's not easy assessing whether shareholders and companies get their money's worth from the compensation earned by executives in any given year.
A case in point: Bemis Co.'s Jeffrey Curler has ranked at the top of Plastics News' chart for two straight years, at No. 3 in 2005 compensation and No. 4 in 2004. Only Magna International Inc. executives earned more for those same years.
As Bemis' president, chief executive officer and chairman, Curler received his most money so far in 2005 - $7.43 million - when the one-year return to shareholders fell 1.72 percent, compared with 2004 when he reaped $6.1 million and the one-year return rose 18.9 percent.
You can find similar scenarios for highly paid executives like Tupperware Corp. Chairman and CEO Rick Goings; the former CEO and president of Newell Rubbermaid Inc., Joseph Galli Jr.; and Spartech Corp.'s retired chairman, CEO and president, Brad Buechler.
Buechler received nearly $2.5 million in 2004 when the one-year return to shareholders was 10.6 percent, but - benefiting from a $3.3 million cash compensation he received when he retired in May - hauled in nearly $4.3 million in 2005. That same year, shareholder return plummeted 22.8 percent.
Because those one-year numbers don't adequately reflect one-year performance, there are many theories, so to speak, on how to judge executive pay.
Some argue that comparing compensation with performance in any one year is valid; others say that only an executive's one-year cash bonus is indicative of that year's performance.
Still others contend that the best yardstick is the amount of wealth the executive accumulates compared with his or her corporate performance over a three- to five-year period. But, even when you do that, some say you need to exclude the value of stock exercised, or cashed in, during that year since it often represents several years of stock options - and the executive decides when to pull that trigger.
Each approach has its proponents and critics.
But the need to use a longer-term assessment - and not look at one-year results in a vacuum - is underscored most dramatically when you look at PW Eagle Inc., which produced a return to shareholders in 2005 of nearly 417 percent, which was almost 2½ times higher than any other public plastics company on PN's chart.
Indeed, the shareholders of PW Eagle are today basking in a stock priced at $33.76 compared to less than $9 one year ago and a range of value between $2.55 and $4.39 from January 2004 to March 2005.
``PW Eagle lost money for years, they are now pumping profits,'' said John Montgomery of Houston-based Bridgeway Funds. He recommended the manufacturer of PVC pipes and fittings and polyethylene pipes as a small-cap stock to watch.
PW Eagle's executive team of President and CEO Jerry Dukes and Executive Vice President and Chief Financial Officer Scott Long, however, ranked just 94th and 118th, respectively, on the pay list, with total compensation for 2005 of just under $495,000 for Dukes and $393,500 for Long.
That's far off the $7.43 million Bemis' industry-leading compensation package to Curler, where return to shareholders declined. Or, the nearly $6.7 million received by Newell Rubbermaid's Galli, who resigned in November, just months after he announced plans to cut 5,000 jobs and close one-third of the firm's 80 manufacturing sites. Newell Rubbermaid's total return to shareholder was less than 2 percent. And Galli had pulled in a combined $6 million the previous two years even though Newell Rubbermaid lost a combined $160 million.
But a year ago, shareholders of PW Eagle might not have been looking as favorably on their executive team.
Why? Their compensation in 2004, when the one-year return on total shareholder value dropped 9.5 percent, was actually higher. Dukes earned $608,800 or 23 percent more in 2004 than he did in 2005, and Long earned 19 percent more or $512,200.
However, now Dukes and Long can point to a better financial picture, partly from their strategic moves and partly because of improved pricing for PVC.
Even if you look only at the bonuses Dukes and Long received for that fast turnaround at PW Eagle, $212,400 and $154,900, respectively, they still rank just 44th and 59th in the category of overall executive bonuses. Yet the bonus is the element of compensation that some experts say indicates how much an executive was rewarded for that year.
How did the CEO and president at Foamex International Inc. - the firm with the highest decline in 2005 shareholder value, at minus 99.2 percent - fare? Thomas Chorman pulled down $767,383 in total compensation - almost a quarter of a million dollars more than Dukes.
Mike Verespej is Plastics News' Washington-based staff reporter.