For Los Angeles’ top public company executives, it was a pretty good year.
In 1999, the average base salary for L.A.’s 100 most handsomely paid corporate execs was $569,160, about the same as the previous year. But average bonuses climbed 22 percent to $904,760.
Bigger pay packages for top executives appear to be the way of the corporate world all across the United States, and possibly even more so in Los Angeles because of its concentration of entertainment and media companies, which tend to pay better than other industries.
“I think bigger salaries is a nationwide trend,” said Joshua Lurie, chief executive of Joint Information Inc., a New York-based compensation research company that compiled the list of L.A.’s highest-paid executives for the Business Journal. “And the trend of exorbitant pay packages will continue.”
Especially, it seems, for New Economy companies.
Dot-com pay bonanza
L.A.’s highest-paid public company executive is Mark R. Goldston, hired last year as chairman and chief executive of Westlake Village-based NetZero Inc., the nation’s largest provider of free Internet access. The forty-something executive was given a modest $127,000 salary and bonus package. But his long-term compensation package of stock options is potentially worth $153 million.
“The New Economy companies like NetZero have a low cash compensation package and a very high equity package,” said George B. Paulin, president of Frederic W. Cook & Co., an executive compensation consultancy in Los Angeles. “The Old Economy companies, like Hilton Hotels, have a better cash package for their executives and offer less in option values. Old Economy companies also have pension plans that are very valuable, where a New Economy company has very little in benefits outside of the basic health insurance.”
New Economy companies tend to be riskier, too. Executives sign on without knowing if their company is going to be around next year. Also, New Economy companies often have sky-high expectations of their CEOs. And often the initial rush of enthusiasm eventually wanes. For example, NetZero went public last fall. On the first day of trading, its stock fetched $27.75 a share. As of last week, it was scraping the barrel at about $7 a share. With that kind of performance on Wall Street, is Goldston really worth $153 million?
“You have to look at where he takes the company to see if he is worth it,” Lurie said.
No other Southern California company came close to offering its executives a compensation package similar to Goldston’s.
Running a distant second in compensation was Alex Yemenidjian, chairman and CEO of Metro-Goldwyn-Mayer Inc., whose equity package and salary totaled $41 million.
The top two executives on this year’s list did much better than last year’s best-compensated executive, Stephen F. Bollenbach, president and CEO of Beverly Hills-based Hilton Hotels Corp. He was given a compensation package last year totaling $27.2 million. Bollenbach does not even appear on the top 100 list this year, however.
L.A. recruiting challenges
Corporate executive salaries rose all across the country in 1999, inching up 8 to 11 percent, experts said. Though they couldn’t break out pay raises by geography, there is anecdotal evidence that the percentage was even higher in Los Angeles.
Maybe that’s because Southern California has always had a harder time attracting top-notch CEOs, analysts said.
Most Fortune 500 companies, except for those in the entertainment and technology industries, are located in Chicago or on the East Coast. Because these areas are more important business centers, many top executives feel that’s where the action is, and recruiting them to come to L.A. poses challenges.
“If you want to attract those executives who went to a good business school, you have to pay a little more,” said Jim Hatch, executive vice president at Compensation Resource Group Inc., a Los Angeles company that specializes in executive compensation and benefit designs. “The reality is economics. There are only so many really good CEOs around. It’s a matter of supply and demand.”
Even in the Web world, Hatch said, many corporate executives would rather work in Silicon Valley than in L.A.
Yet those new-media honchos who are willing to work in L.A. aren’t doing badly at all. There are 14 executives on the list who work in the new-media industry, and another 14 from the technology and biotech industries. The energy industry had 11 executives on the list and the entertainment/media industry had 12.
In short supply on the list are women. In 1999, there were only two women executives who made the best-paid club. They were Linda Wachner, chairwoman and CEO of Authentic Fitness, which makes swimwear and activewear, and Marie Knowles, executive vice president and chief financial officer of Atlantic Richfield Co., which has since been acquired by BP Amoco plc. In 1998, there were six women on the list. Jill Barad, former chairman and CEO of Mattel Inc., is no longer with the toy company. She was No. 27 in 1998. Kathryn Downing, former publisher of the Los Angeles Times, is also gone. She was No. 79.
The shrinking number of women on the list is reflective of the persistent nationwide gender gap, in terms of compensation.
“Corporate America pays its top female executives 75 cents of every dollar paid to top male executives,” Lurie said.
But that’s better than 1998, when female executives made 70 cents for every $1 earned by male executives.
