The heads of Louisiana’s publicly traded companies enjoyed much larger increases — about 35 percent on average — in their 2014 compensation packages than their U.S. counterparts.
“What we’ve been seeing nationally is pay has been relatively flat,” said Aaron Boyd, director of governance research for Equilar.
The company tracks compensation, professional history and wealth events for top executives at public companies. In May, Equilar released the compensation packages for the Fortune 500 CEOs. Median pay for those executives grew by just 0.8 percent to $10.6 million.
Meanwhile, all but a handful of the Louisiana CEOs saw their pay packages grow, and a couple went up substantially, Boyd said.
Equilar has not yet published 2014 figures for CEOs at small- and mid-cap companies, which is where most Louisiana firms would fall.
Nasdaq defines small-cap companies as those whose outstanding shares are valued at less than $500 million. Mid-cap companies’ shares are valued at $1 billion to $5 billion.
Boyd said he’s not sure why Louisiana CEOs saw larger increases than firms nationwide.
Some of it may be because the sample size is small. A few large increases have influenced the results. Mergers and acquisitions may have played a role in equity awards. It’s also possible Louisiana’s public companies have performed more strongly.
Whatever the reason, Louisiana CEO compensation growth stands in contrast to what’s going on elsewhere, he said.
The average compensation for Louisiana CEOs increased by roughly $1.3 million to $4.6 million in 2014. Those figures did not include Baton Rouge-based Amedisys Inc., whose new CEO was hired in December, or Covington-based Globalstar, whose CEO is not paid.
Meanwhile, total shareholder return at the state’s public companies averaged close to 6 percent in 2014, according to figures compiled by Burkenroad Reports at Tulane University’s Freeman School of Business.
Among the Louisiana executives, Cleco Corp. CEO Bruce Williamson saw the largest percentage increase in compensation. Williamson’s compensation package jumped more than 200 percent to $12.8 million.
However, the increase was largely due to built-in rewards for a change in ownership. An investor group led by Macquarie Infrastructure and Real Assets and British Columbia Investment Corp. acquired the Pineville-based utility for $3.4 billion. The deal was announced in October.
Cleco shareholders approved Williamson’s “golden parachute” in February.
Eleanor Bloxman, CEO of The Value Alliance and Corporate Governance Alliance, said there has been a lot more discussion between shareholders and boards about what makes sense when a company is sold.
“It’s not discouraging a sale of the company but perhaps not rewarding to the extent that some companies do,” Bloxman said.
The Securities and Exchange Commission recently published a proposed rule that could give shareholders more insight into how CEO compensation aligns with performance.
The rule is designed to make it easier to compare executive compensation and financial performance, Boyd said. The rule doesn’t say companies have to align pay with performance.
“Really all you have to do is disclose how your pay compares to your peer group’s pay relative to stock price over a five-year period,” Boyd said.
Bloxman said more transparency is good, but linking pay more closely with performance isn’t necessarily desirable.
“If it’s going to help investors, they ought to be showing the financial metrics the company actually uses and believes are important to gauge their peformance,” Bloxman said. “Both the American Bar Association and the Center for Executive Compensation agree on that.”
But the SEC’s proposed rule links executive pay to total shareholder return, she said. This could influence management in a less-than-desirable way.
Attempts to boost stock prices were at the root of the failures of Enron and WorldCom, two of the largest collapses in U.S. history, and helped push banks to take risks that led to the financial market’s meltdown, Bloxman said.
In general, pay packages are designed to reward executives when companies perform well. When they don’t, there’s an assumption that compensation packages will be adjusted accordingly.
Peter Ricchiuti, who heads Tulane’s small-cap research fund, said energy company executives have seen their stock options and incentive payments follow oil prices downward.
CEOs at four of the six energy and energy service companies — Stone Energy, PetroQuest Energy, Tidewater and Conrad Industries — took double-digit cuts in their compensation packages.
CEOs at Hornbeck Offshore and Petroleum Helicopters enjoyed double-digit increases in compensation.
Follow Ted Griggs on Twitter @tedgriggsbr