2010 was a rebound year for many publicly traded North American plastics companies featured in our special report and ranking this week. The result: Many executives have seen their compensation on the rise.
Overall, 21 companies on the Plastics News rankings posted positive one-year total shareholder returns in 2010 ranging from 3 percent to 222 percent, with nine companies posting one-year TSR declines of 3-60 percent. One-year numbers were not available at the other five companies — four of which are not publicly traded.
For the three-year total shareholder returns it was a different story, with 14 companies posting a positive return of between 1 and 41 percent, 15 posting negative three-year declines of between 3 and 53 percent and one company where total shareholder returns remained flat over three years. Three-year numbers were unavailable for the same five firms referred to above.
And most PN executives profited financially from improvements in one-year corporate performance as 115 of the top 150 executives received non-equity incentive payouts in 2010, with 17 of them over $1 million. That compares to 2009 when 108 executives received NEIP payouts, with 14 of them at $1 million or more.
As a result, both the average and median non-equity incentive payouts jumped in 2010. The average in 2010 increased 157 percent from just under $332,000 in 2009 to slightly more than $856,000 in 2010. The median increased 25.6 percent from $155,611 in 2009 to $195,390 in 2010.
Will that trend continue in 2011? Experts think so, but perhaps not to the same degree that were common in 2010.
The problem — shareholders are losing too much value in the volatile stock market this year.
Things might change if the market is finished “correcting” and starts to rise before the end of the year. But as of right now, it looks unlikely that executives will be able to count on getting bigger bonuses in 2011.
Exactly what can they expect? Aaron Boyd, director of research for executive compensation research firm Equilar Inc. in Redwood Shores, Calif., suspects pay will be flat, or even a little down.
On the other hand, James Reda, founder and managing director of James F. Reda & Associates LLC in New York, thinks 2011 will be another strong pay year for executives.
“A lot of pay is pegged to [earnings before income, taxes, depreciation and amortization] and EBITDA is not going to change that much in the next six months,” Reda said. “I don't think everything will fall off like it did in 2008 and 2009. So I think companies will meet goals and have a decent short-term and [long-term incentive] payout.”
It's also about expectations, to a large degree, and companies' performance compared to their competitors and to the market as a whole. And, like the federal budget, no one really expects executive pay to shrink. The debate is usually about how much it will increase each year, and the mix between long- and short-term compensation.
Executive pay will remain at high levels, and is likely to increase. And while shareholders may be starting to flex their muscles on compensation issues, the majority of power still rests in the executive suite.