T. Rowe Price Group awarded nearly $24 million in compensation last year to its top three executives, reflecting the Baltimore money manager's strong performance and inflows of new money despite market volatility.
Chief executive James A.C. Kennedy's package totaled $7.74 million in salary, bonus, stock awards and perks last year, according to a preliminary proxy filed yesterday with the Securities and Exchange Commission.
Most of Kennedy's pay came from a cash bonus of $5.75 million, an increase from $4.3 million in 2006. His bonus could have been more than $16 million under a formula disclosed in the proxy.
Kennedy's stock option grants last year were valued at $1.36 million. Other compensation, including retirement and charitable contributions, totaled $281,249.
But Kennedy's paycheck wasn't the largest: that went to Brian C. Rogers, Price's chief investment officer as well as board chairman. His package was worth $8.9 million, including a $6.25 million cash bonus, up from $4.8 million in 2006, and stock option grants worth $2 million.
Edward C. Bernard, vice chairman and president of T. Rowe Price Investment Services, had a compensation package of $7.1 million last year. Bernard's cash bonus was $5 million, an increase from $3.8 million in 2006.
Each executive received $350,000 in base salary in 2007, unchanged from the previous year.
Steven Hall, managing director at New York firm Steven Hall & Partners, which consults on compensation plans with boards, said it's common for executive pay in the financial services and mutual fund industries to be heavily tied to individual and company performance.
"They pay the people who deliver results," Hall said. "You had the CIO make more money than the president. Find another industry where anybody makes more money than the CEO. It's unique to this business because they actually pay people based on what metrics they deliver on."
In setting last year's bonus and stock options, Price's directors considered the company's record $2.2 billion in revenue and profit of $670 million, and that at least 72 percent of its funds outperformed their comparable Lipper averages on a total return basis for the three-, five- and 10-year periods that ended Dec. 31.
The directors also considered that Price clients plowed $33.8 billion into its funds last year, according to SEC filings. Price ended the year with record assets of $400 billion.
Moreover, Price directors noted progress on capital projects to fuel its growth in Maryland and elsewhere, including a new customer service call center in Colorado and plans to expand its Owings Mills campus.
"We align our executive compensation, which is primarily based on incentive compensation, with the interests of our stockholders and directly link it to our overall corporate performance and our success in achieving our long-term strategic goals," spokesman Brian Lewbart said.
By comparison, the compensation package for Legg Mason Inc.'s Raymond A. "Chip" Mason was valued at $13.7 million for the fiscal year that ended March 31, 2007, according to SEC filings. Almost half of Mason's pay came from a cash bonus of $6 million. The bonus represented a steep cut from his $14 million bonus the year before.
The asset manager's directors considered the fact that Legg's stock price dropped 25 percent in the previous fiscal year and Mason's own recommendation that his bonus be reduced.
Legg Mason recently named insider Mark R. Fetting to replace Mason as chief executive. Mason remains nonexecutive chairman.
hanah.cho@baltsun.com