The CEO of an automotive parts giant again tops the annual Plastics News list of highest-paid industry executives, and it's the cash and stock bonuses tied to performance metrics that really set the top of the list apart.
Magna International Inc. again comes in first among plastics industry's highest paid executives, with CEO Donald J. Walker bringing in $18.9 million in total compensation for 2013, according to our latest executive pay compensation ranking.
Walker is joined on the list of the 155 top-paid plastics execs by four fellow Magna executives: Executive Vice President and CFO Vincent Galifi at No. 7 with $7.6 million; Tommy J. Skudutis, chief operating officer for exteriors, interiors and seating, at No. 8 with $7.5 million; Jeffery O. Palmer, executive vice president and chief legal officer, at No. 14 with $5.5 million; and Guenther Apfalter, president of Magna
Europe and Magna Steyr, at No. 22 with $3.5 million.
But Magna is an outlier in both executive compensation — especially considering the list's total compensation median of $1,192,955 — and size. When it comes to pay, size does matter, explained Equilar Inc.'s Aaron Boyd, director of governance research.
“Size plays a big role,” Boyd said. “Magna pays their people a lot of money. So does Newell Rubbermaid, PolyOne — these are huge companies, they're making a lot of money. Other, smaller companies can't compete on size. Don't underestimate size.”
Aurora, Ontario-based Magna is the largest automotive supplier in North America, with $34.8 billion in revenue and a $1.9 billion operating budget in 2013 and more than 130,000 employees at nearly 400 locations in 29 countries worldwide.
Newell Rubbermaid has two execs in the top five, including President and CEO Michael B. Polk at No. 3 and freshly-minted Executive Vice President and Chief Development Officer Mark S. Tarchetti at No. 5. The Sandy Springs, Ga.-based consumer products giant boasts more than 19,000 employees and reported sales of approximately $5.7 billion in 2013.
“For executives, especially a CEO, their job is always on the line, and the company's revenue is only a part of the equation in figuring out if they're doing a ‘good' job,” Boyd said. But the bigger the company, the bigger the risk a CEO is taking with every decision they make, Boyd said, and that plays a big role in the crafting of executive compensation packages.
PolyOne Corp.'s newly retired chairman, president and CEO, Steve Newlin, is second on the list, and propelled the Ohio-based specialty compounder to a record annual revenue of $3.8 billion in 2013. The lion's share of his $11.3 million pay package — nearly $8.5 million of it — came in the form of performance-based cash and stock awards.
“One of the trends in recent years has been to move away from cash and more towards equity,” Boyd said. “To align pay with performance to a greater degree, companies are looking for a way to tie that better to equity.”
It's not necessarily a brand new trend and it isn't that, with reporting changes at the U.S. Securities and Exchange Commission reporting rules, all of a
sudden companies tied pay and performance. But it is a more visible trend now, particularly with the amount of disclosure “increasing 100 fold since 2006,” Boyd said.
“Now investors and the general public can look at how companies expect to perform and set goals and that transparency has changed how companies go about doing it,” he said. “Metrics, goals, everything is much more transparent and in the open.”
And with the goals more visible to the public, and shareholders, publicly traded companies are also finding themselves revealing more and more of the overall goal-setting process, including when the goals are tied to executive pay.