Whether public opinion is that they make too much or are being fairly rewarded for hard work and taking risks, North American plastics executive compensation is keeping pace with other industries and the market at large.
That's good news for analysts and investors, signaling certain recovery from the recession that began in 2008 and plagued the U.S. economy — and balance sheets around the world — for more than half a decade.
“Plastics does look pretty consistent with what we're looking at across the market when it comes to CEO pay and executive pay in general,” said Dan Marcec from the California-based executive compensation research firm Equilar, which provided Plastics News with the annual survey data on 159 North American plastics executives.
Even under increased scrutiny between the 5-year-old Dodd-Frank requirements and the sheer accessibility of financial information on publicly traded companies, CEO pay is still on the rise, reaching a median $10.3 million among S&P 500 companies in 2014, according to Equilar. The median for this year's
Plastics News top 100 highest compensated industry executives is a more modest $1.8 million in total compensation, which Marcec called “consistent with the market.”
Plastics News' executive ranking covers only executives from North American companies that publicly traded equity or debt for the 2013 calendar or fiscal years and that generate roughly 50 percent or more of their annual sales from the in-house processing, recycling or compounding of plastics. The ranking data was supplied by Redwood City, Calif.-based Equilar Inc., an executive compensation research firm.
Magna on top
Magna International Inc. remains first among plastics industry's highest paid executives, with CEO Donald Walker taking $21.2 million in total compensation for 2014, according to the latest data, an 11.6 percent increase over the previous year. Walker's total compensation package increase on the year tracks with the company's 10.3 percent gross profit growth last year, though the CEO's bump far exceeds the company's net sales increase of 5.2 percent.
Magna occupies five of the top 25 positions on the Plastics News list, with a more than $47.5 million in combined executive payouts for 2014: Executive Vice President and CFO Vincent Galifi at No. 4 with $8.5 million, up three positions from the previous year; Tommy Skudutis, chief operating officer for exteriors, interiors and seating, with $8.3 million at No. 6, a two-position increase on the list and 10.6 percent pay raise; and Jeffrey Palmer, executive vice president and chief legal officer, making $6 million at No. 14. Only Guenther Apfalter, president of Magna Europe and Magna Steyr, saw a slight cut, from $3.5 million to $3.4 million, nearly 3 percent less than the previous year, falling two positions on the list to No. 24; Apfalter also has a $242,000 base salary, slightly lower than the $325,000 for other Magna execs listed.
But Magna, and a handful of other major companies, are way outside the normal executive pay bell curve, even outside the plastics industry, experts said.
“For the most part, these numbers [are] really consistent with the market. You have your huge companies like Magna and Rubbermaid and Sealed Air at the top of the list and then a drop off, because they are outliers. Donald Walker at Magna is really an outlier, even among the top S&P companies,” Equliar's Marcec said. “But these companies make money, a lot of money. And the company is performing well so it's not unreasonable to see the company's top leaders reaping the benefits of that.”
Newell Rubbermaid, Sealed Air move up
Newell Rubbermaid Inc., with high representation on the list at six entries, lead by Michael Polk, president and CEO at No. 2 on the list and $12.4 million in total compensation for 2014. At $1.2 million, Polk's base salary is significantly higher than Walker's, but the 42 percent pay gap between top two execs on the list is much more a function of sheer size than anything else; consider the gap between Magna's $36.6 billion in net sales last year vs. Rubbermaid's $5.7 billion.
Much more comparable for Sandy Springs, Ga.-based Rubbermaid is Sealed Air Corp., with $7.7 billion in net sales for 2014. Sealed Air CEO Jerome Peribere comes in at No. 3 on the list, with a nearly $12 million total pay package last year, even after a relatively short stint at the packaging giant, best known for its Bubble Wrap brand. Peribere moves up from fourth on the list last year and has seen a rapid rise in prestige as well as pay since jumping from the top spot at Dow Chemical Co.'s Advanced Materials division into the chief operating officer role at Sealed Air in August 2012 and moving up to president seven months later.
“Typically someone coming in from the outside is going to be paid more because of the incentive to move,” Marcec said. “And depending on negotiations to get them there, you may see rapid increases or changes on top of performance-based pay.”
But luring employees to a new company is hardly exclusive to the multi-million-dollar paycheck crowd, he said.
“I don't think that's exclusive to executives at all. Jumping from job to job is how you get paid in so many industries at so many different levels,” he said.
And Peribere's pay is not all hook, line and sinker to get him to make the move to Sealed Air. More than $10 million comes in stock awards, and he has sent the stock soaring. Look for an even bigger increase, and more of Sealed Air's executives moving up in rankings next year; Sealed Air stock was trading at a all-time high in early August, partially on the news of purchasing French company B+ Equipment, which designs, manufactures and services automated packaging equipment for product order fulfillment and dominates the European e-commerce market; Sealed Air has been the exclusive licensee of the I-Pack system in North America, Australia and New Zealand for more than five years.
Sealed Air also is growing in North America, breaking ground on its new Charlotte, N.C., headquarters in June and expecting to have more than 1,200 workers there once its move from Elmwood, N.J., is complete in early 2017. The move, which will not impact manufacturing locations, will put the company's leadership, research and development facilities and corporate offices for the parent firm as well as subsidiaries Cryovac and Diversey under one roof.
‘Pay for performance'
“We absolutely continue to see pay-for-performance trends,” Marcec said, citing Sealed Air as an example of significant performance-based compensation increases for the plastics industry specifically.
In overall equity trends, in 2010, 51.7 percent of S&P 500 companies had performance equity plans as part of their overall executive packages. In 2014, that number has jumped to 69.3, according to Equilar research, and is expected to continue upward for now. Part of the increase is attributable to the simple fact that companies are evermore subject to the opinions of their shareholders. And shareholders are growing ever savvier when it comes to accessing information, continually raising expectations for explanation and understanding of a company's corporate culture even after they've invested. Going forward, the more transparent a company is willing to be about broad financial goals and the specific goals for its high-paid C-level team, the less susceptible it will be to activist shareholder shakeups or even just harsh criticism spreading across the Internet.
“This is all public information anyway,” Marcec said. “So it's out there and available and it's become so much more accessible now. Do you want to control your own story?”