Lennar CEO Stuart Miller earned almost $13 million last year. That’s more than $4,000 per work hour, easily making the 55-year-old the highest-paid chief executive among South Florida’s 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, Miller’s pay may be seen as about right.
While the chief of the nation’s largest homebuilder earned a higher salary than any of the other CEOs of the region’s 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 CEO’s pay,” Luis Navas, a consultant with Global Governance Advisors, said of Lennar. “They have almost perfect pay-for-performance alignment.”
For this year’s review of CEO compensation, Business Monday is examining not only a CEO’s salary, but also how that compares to how each company rewarded shareholders during the same year. It’s 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 executive’s pay with the equivalent of a shareholder’s pay: that is, gains in stock price and dividend payouts during the same time period. By GGA’s 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 GGA’s 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 shouldn’t be the only measure used when determining a CEO’s pay, but it gets extra attention from investors. Gaps between the overall market and individual company’s performance have gotten more attention as a rebounding economy lifts stocks in most industries (last week’s gyrations notwithstanding). Compensation experts say the best pay systems don’t 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 doesn’t have to do anything, and the stock price will go up.”
The GGA review of South Florida’s 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:
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 Miller’s $13 million compensation at Lennar tops the pay list in South Florida, it’s a fraction of the $96 million earned by Larry Ellison, the Oracle CEO who earned the No. 1 compensation slot on GGA’s list of the largest companies nationwide. (Returns on Oracle shares dropped 22 percent.)
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 Arison’s personal wealth at $5.7 billion, while Miller is not considered wealthy enough to make the magazine’s annual list of the 1,000 richest people in the world.
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 company’s 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.
At Carnival, the most perks went to the executive who presided over the cruise company’s 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 Carnival’s 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 Foschi’s 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 Group’s 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 CEO’s hefty salary to justify increasing the pay for their own — saying they must match industry benchmarks in order to remain competitive.
“Everyone’s 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 company’s profit stream.
For Lennar’s Miller, in the year he took home a $13 million compensation package, the company’s stock price doubled and added about $3.7 billion in the company’s 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 CEO’s 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 year’s stock gains misses the long-range value talented CEOs bring to a company.
“I don’t believe management or a board should be watching a company’s stock,’’ said Victor Mendelson, a HEICO’s 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 it’s worth almost $2 billion.
A year’s share-holder return, Mendelson said, “is a short-term metric on a very long-term plan.”
South Florida’s compensation information highlights both the rarefied income strata occupied by the region’s 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 Shalala’s 2011 compensation as president of the University of Miami, one of Miami-Dade’s largest employers. The county’s largest private employer, Baptist Health, lists CEO Brian Keeley’s compensation at about $2.4 million, according to public tax returns filed by the non-profit.
Miller’s $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 Florida’s modest share of Corporate America’s big leagues. In terms of market capitalization, which is essentially the combined value of a company’s stock on any given day, no South Florida firm falls on GGA’s list of America’s 50 largest companies.
The closest is NextEra, with a market value of $29 billion — enough to snag No. 109 on the list of the nation’s largest companies. Lennar’s 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 GGA’s 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 weren’t 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 country’s largest companies.
Sports arenas find it harder to drive profits without the deep entertaining budgets of hometown national firms. Museums and concert halls can’t 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-Dade’s economic-development agency. “From a historic perspective, if you have a CEO engaged in the community, the community has fared better.”