Lennar CEO Stuart Miller earned almost $13 million last year. Thats more than $4,000 per work hour, easily making the 55-year-old the highest-paid chief executive among South Floridas largest companies.
Was Miller overpaid? His compensation from the national home builder his father co-founded amounted to 265 times what the Bureau of Labor Statistics said is the average annual pay for someone in the construction business. But by one measure of particular interest to shareholders, Millers pay may be seen as about right.
While the chief of the nations largest homebuilder earned a higher salary than any of the other CEOs of the regions largest companies, Lennar managed to reward its shareholders in an out-sized way, too.
The Miami-based company saw returns double last year, with stock price surging from around $18 to $38 a share amid a broader rebound in the building industry.
As his company has done better, it has been fairly reflected in the CEOs pay, Luis Navas, a consultant with Global Governance Advisors, said of Lennar. They have almost perfect pay-for-performance alignment.
For this years review of CEO compensation, Business Monday is examining not only a CEOs salary, but also how that compares to how each company rewarded shareholders during the same year. Its a key metric, according to GGA, a compensation advisory firm with headquarters in Toronto and Miami. GGA partnered with the Herald for this story. The firm analyzed the compensation filings for the 25 largest firms in South Florida, as measured by the value of their publicly traded stock.
Along with ranking each CEO by compensation earned, GGA compared the chief executives pay with the equivalent of a shareholders pay: that is, gains in stock price and dividend payouts during the same time period. By GGAs standards, both payouts should be in line as one goes up, so should the other.
On this scale, Citrix does not fare well. The CEO of the tech giant, Mark Templeton, earned more last year than almost every South Florida chief executive on the list, finishing fourth with a pay package of $12.2 million. But when it comes to shareholder returns, the company finished 14th on GGAs local rankings.
The return for Citrix shareholders amounted to just 8 percent not much of a gain, relatively, during the bull market of 2011. The NASDAQ 100 stock index, which includes Citrix, shot up 15 percent in the same time period.
Navas said shareholder return shouldnt be the only measure used when determining a CEOs pay, but it gets extra attention from investors. Gaps between the overall market and individual companys performance have gotten more attention as a rebounding economy lifts stocks in most industries (last weeks gyrations notwithstanding). Compensation experts say the best pay systems dont reward CEOs simply for presiding at a time of recovery or punish him or her for being at the helm during a recession.
In 2009, if you were operating a company exactly as you should, the stock price was still going to go down, said Josh Wilson, a compensation consultant at Mercer. During a rebound, there is a common view that a CEO doesnt have to do anything, and the stock price will go up.
The GGA review of South Floridas Top 25 companies found a mix of CEOs who could be considered under-paid compared to shareholders and some who could be considered over-paid. Of course, with a median yearly compensation of $6.5 million roughly $2,100 per hour for a 60-hour week all would be considered well-paid. In fact, the median pay for a CEO in South Florida is about 12 times more than for a CEO across the country, when adjusted for the size of the company.
Among the other findings in the data provided by GGA and in the corporate filings by the companies on the list:
• Of the 25 largest publicly traded companies in South Florida, none have a female CEO.
• The median pay for a CEO on the list is $6.49 million per year, compared to $16 million per year for the 50 largest publicly traded companies in the country. But when adjusted for size, South Florida CEOs are earning a premium.
In South Florida, the median pay for a CEO is $1.82 in compensation for every $1,000 of their companies market value, compared to only 15 cents in compensation for the Top 50 CEOs in the United States for every $1,000 of their companies market values.
In other words, the typical South Florida CEO gets paid 12 times more on a dollar-by-dollar basis than does his national counterpart.
While Millers $13 million compensation at Lennar tops the pay list in South Florida, its a fraction of the $96 million earned by Larry Ellison, the Oracle CEO who earned the No. 1 compensation slot on GGAs list of the largest companies nationwide. (Returns on Oracle shares dropped 22 percent.)
• Millers overall stock holdings pale in comparison to Carnival CEO Micky Arison. Arison, who also owns the Miami Heat, controls shares of the worlds largest cruise line worth $6.7 billion. Millers stock holdings were valued at $890 million in 2012.
Both men preside over companies started by their fathers, and many of the shares they control are in trusts that actually benefit other family members. Carnival said in an email that Arison financially benefits from about 64 percent of the stock holdings he controls. Lennar declined to participate in the story.
Forbes puts Arisons personal wealth at $5.7 billion, while Miller is not considered wealthy enough to make the magazines annual list of the 1,000 richest people in the world.
• Serving on the boards that ultimately decide on a CEOs pay can be a good living in itself.
At HEICO, the aviation-parts maker with headquarters in Hollywood, Adolfo Henriques, CEO of Gibraltar Bank, earned $148,000 in cash for serving as a director, which included attending five board meetings and four meetings of the finance committee, according to HEICO filings.
By Wall Street standards, Henriques was underpaid. The average Fortune 500 director earned $220,000 last year, according to analysis by Towers Watson. That put Modesto Maidique, former president of Florida International University, at roughly the norm for the $226,000 earned as a director of Carnival.
Jackson Health CEO Carlos Migoya earned $364,000 for his other job as a director of AutoNation. Most of that pay comes in stock options that are only worth money if the companys share price rises. A spokesman at Jackson, where Migoya earns about $730,000 a year but could see his compensation top $1 million with bonuses, said Migoya plans to attend four AutoNation meetings this year, and takes personal leave for his director duties.
• Compensation can mean VIP perks as well as cash and stock. Lewis Hay, executive chairman and former CEO of FPL parent NextEra, received a reported $242,000 in executive perks last year, including club memberships, a home-security system, a $33,000 car allowance and $113,000 worth of personal flights on the corporate jet. In a statement, FPL said: Under Mr. Hays leadership, the company had superior operating results and has delivered significant shareholder value. His compensation reflects these results and is also consistent with other peers in the industry.
At Carnival, the most perks went to the executive who presided over the cruise companys Italian line when the January 2012 Costa Concordia shipwreck killed 32 passengers. Pier Luigi Foschi, formerly CEO of the Costa division and now head of Carnivals Asian arm, received $186,000 toward living accommodations, nearly $100,000 for a driver and security, and $56,000 for a Honorarium fee to Knights of Labor in Italy. A Carnival spokeswoman said Foschis perks are typical for an executive in Italy.
Long a lightning rod for consumer and investor ire, CEO compensation gained even more attention during the market crash of 2008 and the recession that still has wages stagnant and housing values a fraction of what they were before the downturn. Meanwhile, executive compensation seems to have rebounded nicely.
Nationally, according to The Hay Groups annual survey, the average CEO pay stands at about $10 million, roughly 13 percent higher than it was in 2007 (which is roughly equal to the rise of inflation in the same time period). Of the five best-paid CEOS on the 2012 list for South Florida, none are making less than they were in 2007. On average, their pay is up $5 million since before the recession began, an 18 percent increase.
In the same time period, between 2007 and the start of 2013, the Dow Jones Industrial Average ended up about 5 percent.
Compensation advisors, including GGA, get paid to present in-depth recommendations of what a company should be paying a CEO. Often, one company will use another CEOs hefty salary to justify increasing the pay for their own saying they must match industry benchmarks in order to remain competitive.
Everyones pay is based on what everyone else is making, said Charles Elson, a finance professor at the University of Delaware who studies corporate governance. That creates a ratcheting-up effect.
But defenders of hefty CEO pay point out that a successful chief executive can deliver exponentially more for shareholders than what he or she is taking out of the companys profit stream.
For Lennars Miller, in the year he took home a $13 million compensation package, the companys stock price doubled and added about $3.7 billion in the companys market value.
Basically, you distributed $4 billion to shareholders, said Navas, of GGA. You might say $13 million for a CEO is a good deal.
At HEICO, the CEOs pay mostly aligned with shareholder returns in 2012 both trailed the pack in South Florida. The family-controlled company still paid CEO Laurans Mendelson $3.5 million, and his son and top HEICO executive said focusing on a short-term measure like a years stock gains misses the long-range value talented CEOs bring to a company.
I dont believe management or a board should be watching a companys stock, said Victor Mendelson, a HEICOs co-president who as a college student in the 1980s, first spied HEICO as a potential takeover target for his father. He noted that HEICO was worth about $20 million when the family took it over 30 years ago, and now its worth almost $2 billion.
A years share-holder return, Mendelson said, is a short-term metric on a very long-term plan.
South Floridas compensation information highlights both the rarefied income strata occupied by the regions top CEOs, and how small of a footprint South Florida occupies when it comes to Wall Street. Miller makes far more than the $1.2 million listed as Donna Shalalas 2011 compensation as president of the University of Miami, one of Miami-Dades largest employers. The countys largest private employer, Baptist Health, lists CEO Brian Keeleys compensation at about $2.4 million, according to public tax returns filed by the non-profit.
Millers $13 million annual pay trails far behind the $18 million the Heat pays LeBron James, widely considered one of the best professional athletes playing today. The big difference: James fame and popularity allowed him to bring in an extra $40 million in endorsement revenue last year, according to Forbes
But the filings also help reveal South Floridas modest share of Corporate Americas big leagues. In terms of market capitalization, which is essentially the combined value of a companys stock on any given day, no South Florida firm falls on GGAs list of Americas 50 largest companies.
The closest is NextEra, with a market value of $29 billion enough to snag No. 109 on the list of the nations largest companies. Lennars Miller was paid slightly less than Goldman Sachs Lloyd Blankfein, whose $13.3 million compensation package gave him the 35th slot in terms of compensation on GGAs list of the 50 largest companies in America.
South Florida does score better on a more familiar ranking of corporate might: the annual Fortune 500 list, which ranks companies by revenue rather than stock value.
On that list, World Fuel Services finishes the highest at No. 74, bringing in $39 billion a year. Also big enough to land on the Fortune 500: AutoNation, NextEra, Office Depot and Ryder. (Carnival and Royal Caribbean would have made the list if they werent officially headquartered in foreign countries to reduce their U.S. tax bills.)
The relative paucity of Fortune 500 firms South Florida is the 11th largest regional economy in the country generally is seen as a negative by economic planners. The scattering of Fortune 500 firms robs South Florida of the stable source of well-paying jobs found in metropolitan areas with a higher share of the countrys largest companies.
Sports arenas find it harder to drive profits without the deep entertaining budgets of hometown national firms. Museums and concert halls cant rely on a deep bench of corporations to write big naming checks for new buildings.
If you look at communities around the country where major headquarters are located, those CEOs ensure a level of civic engagement and corporate responsibility, said Robin Reiter, a long-time foundation consultant now serving as interim president of the Beacon Council, Miami-Dades economic-development agency. From a historic perspective, if you have a CEO engaged in the community, the community has fared better.