If he makes good on his promise to boost Black & Decker Corp.'s stock price, Chief Executive Officer Nolan D. Archibald will have earned more each day in 1992 than the average Marylander earned all year.
That's one of many surprises revealed in new proxy statements, which for the first time require companies to tell stockholders exactly how much top executives are paid -- and how well the company's stock performed. And that information is fueling a growing debate: Are the executives worth the millions they receive?
In a survey of the 20 biggest public companies in Maryland that have released 1992 financial information under new reporting rules, The Sun found that the top executives' total compensation ranged from an estimated $8.7 million for Mr. Archibald to $427,000 for Waverly Inc. Chairman William Passano.
The average CEO in the group earned $1.6 million in 1992, slightly more than the national average, according to a survey of 350 CEOs by the Wall Street Journal, and 64 1/2 times the salary of the average Marylander.
That is reasonable, executives, directors and many compensation consultants say, noting that bonuses were tied to profits and other performance criteria.
For example, stock options, which made up about 83 percent of the value of Mr. Archibald's compensation package, will be worth nothing if the stock price doesn't rise.
(The estimated $7.2 million value of Mr. Archibald's options was derived using a standard formula for pricing options, which are ,, the right to buy stock in the future at a predetermined price.)
But a growing number of critics charge that CEO compensation has become too lavish in recent years, even as workers have been laid off and profits have suffered.
Some investors are trying to cap, or cut, executives' pay. And, because of one angry Silver Spring investor, Harry Katz, some of thefirst battles over paychecks will be fought in the annual meetings of Maryland companies such as GEICO Corp., MNC Financial Inc. and Marriott Corp.
Mr. Katz, a retired U.S. Patent Office attorney, doubts that a company president's job is tougher than the job of U.S. president, so he wants to cap CEO compensation at $300,000 -- 150 percent of President Clinton's salary.
"They've lived like kings," says Mr. Katz, whose proposal will be voted on at annual meetings of several local companies. Given the poor economy, the executives "should be glad to have a job for $300,000."
Key to the battle between executives and angry investors are documents mandated last year by the Securities and Exchange Commission.
In 1992 proxies, which are like ballots for stockholders, companies must specify not only how much they pay executives, but also how they structure that compensation -- including salaries, bonuses, stock options and perquisites such as country club memberships. And the charts must be accompanied by a graph comparing the company's stock performance with that of competitors and a broad market index.
That information should provide ammunition for both sides in the battle over executive pay. Critics can note that there seems to be little correlation between pay and either company size or profitability. Meanwhile, some local companies can note that their executives were paid far less than average while returning better-than-average profits.
For example, Black & Decker paid Mr. Archibald $1.4 million in salary, bonus and perquisites on top of an estimated $7.2 million worth of options to buy company stock in the next decade. But last year the company reported a $333.6 million loss (including $237 million for accounting changes). And, although the company was profitable before taxes, accounting changes and interest for the company's 1989 takeover of the Emhart Corp. were taken out, Black & Decker's operating earnings of $417 million were 12 percent lower than in 1991.
Nor have Black & Decker stockholders fared well. In the past five years, the stock has returned a total of only 7.5 percent, counting reinvested dividends and stock appreciation.
The company points out that the board hasn't given Mr. Archibald a raise in three years and won't grant him any more stock options through 1996. And the large option grant ties compensation to his ability to boost profits.
Though some executives such as Mr. Archibald received millions even though their companies struggled, other local executives VTC got comparatively small paychecks despite above-average financial performances.
For example, at Waverly, a Baltimore-based medical publisher, Mr. Passano got the lowest paycheck of the group examined, $427,000, even though Waverly stock was among the top local performers, as its price rose about 50 percent in 1992. (Because of accounting rule changes, the company reported a net loss last year.)
Nor is Mr. Passano's compensation related to his company's size -- he oversees more employees than other, higher-paid Maryland executives.
Although Mr. Katz's compensation cap may be viewed as a bit severe, some big investors say he has the right idea. Howard "Pete" Colhoun, a director of the Maryland Retirement Fund, says he and other representatives of big investment funds are getting fed up with high executive pay.
For too long, he says, stockholders have said nothing as executives appointed their buddies to boards of directors and had them rubber-stamp big bonuses and stock option grants.
Mr. Colhoun is fighting to have corporate boards made up of independent overseers and stockholder representatives. "It shouldn't be the lawyer for the firm or the banker," he says. "They don't want to bite the hand that feeds them" by recommending a pay cut, even if the company is performing poorly.
"And I don't want the presidents of companies to swap with each other on boards so they can say, 'I won't do it to you if you don't do it to me,' " he says.
As a part of the SEC reforms that required fuller disclosure of compensation, rules against concerted action by big investors were eased, says Anne Hansen, deputy director of the Council of Institutional Investors.
For example, when a pension fund or other major shareholder wanted to communicate in writing to another large holder, the SEC used to require that copies be sent to every shareholder. Now, the shareholder has to send a copy only to the SEC, making it easier to discuss such issues as limiting compensation or supporting independent directors.
And at the top of the agenda will be executive pay. "These people are overpaid for what they do," Ms. Hansen says.
Still, executives and some compensation consultants say highly paid CEOs are simply reaping the benefits of a free market.
Bethesda-based GEICO, the first Maryland company to be targeted by Mr. Katz's proposal, has fought back, arguing that with perquisites like the White House and Air Force One, Mr. Clinton really gets more than $10 million, far more than CEO William B. Snyder's $1.8 million compensation last year.
And even if you include the $38 million worth of stock options Mr. Snyder cashed in last year (not counted as 1992 pay because they were awarded during the 1980s), he "is worth every penny," says Ira Kay, a New Jersey economist who runs the Hay Group's compensation consulting service.
Mr. Kay, whose company is one of the nation's leading consultants on executive pay, notes that GEICO has been highly profitable during Mr. Snyder's tenure.
Andre Brewster, a Piper & Marbury lawyer who sits on the directors committees that set executive compensation for the Ryland Group Inc. and Alex. Brown Inc., says the average CEO pay of $1.5 million "is about right" but that levels vary according to industry.
One of the reasons Alex. Brown CEO A. B. Krongard earned about $800,000 more than Ryland chief Roger Schipke is that compensation tends to be higher in investment banking. At companies such as Provident Bankshares Corp., where CEO Carl W. Stearn earned just $487,712 despite high earnings and stock returns, executives tend to earn less than average because commercial and retail banks are relatively low-paying.
And sometimes, Mr. Brewster says, it makes sense to pay an executive a lot even though the company is losing money. Losses might be caused by economic shifts that are beyond anyone's control, he notes, and an executive may be doing a good job by minimizing losses.
Mr. Brewster says he wouldn't hesitate to recommend a cut in CEO pay if warranted, but he is the kind of director critics are concerned about, since his law firm represents Alex. Brown and Ryland.
Mr. Brewster says he was forced by the New York Stock Exchange to resign from the Alex. Brown committee that oversees the company's audit because of the exchange's concern about a conflict of interest. So he switched to the compensation committee.
Other local directors say that although many of the same executives, bankers and lawyers appear on corporate boards, they haven't seen evidence of raise-swapping.
Harry K. Wells, a retired McCormick & Co. chairman who sits on the boards of four local companies, thinks some of the high pay he has seen publicized recently, such as $124 million last year for Thomas Frist, CEO of Hospital Corp. of America,. "is ridiculous."
But the boards he is on, including those of Loyola Capital Corp. and Baltimore Gas and Electric Co., pay executives comparatively low salaries while getting excellent performance, he says.
"People are very cognizant of [avoiding] 'You scratch my back, I'll scratch yours,' " he says. Nevertheless, Mr. Wells says, he sometimes wishes he had been born just a few years later to take advantage of the boom.
"That thought has crossed my mind," he says.