Reflecting the down economy, compensation for the top-paid HR leaders dropped in 2008—and experts say that the trend has gotten even worse in 2009.
The average compensation for executives on the list has dropped 20 percent since 2007, says Deborah Nielsen, director of data operations at Salary.com, which compiled the data for Workforce Management. The list is compiled from companies’ proxy filings with the Securities and Exchange Commission.
A 20 percent drop in overall compensation is in line with what has occurred with other top executives’ pay, Nielsen says.
The majority of executives listed on Workforce Management’s annual list of the 30 highest-paid HR leaders are different from those who were on last year’s list. Among those appearing on both years’ lists are Jean Halloran of Agilent Technologies Inc., Marina Armstrong of Gymboree Corp., Jon D. Walton of Allegheny Technologies Inc., John M. Murabito of Cigna Corp. and Larry D. Hunter of DirecTV Group Inc.
While salaries were down only 1 percent from 2007, discretionary bonuses were almost nonexistent among the 30 top-paid HR executives in 2008. Only four executives received discretionary bonuses in 2008, down from 12 in 2007. And the amounts of these bonuses have dropped drastically. The biggest bonus in 2007 was $1 million. In 2008, the biggest bonus was $420,000, awarded to Robert K. Kretzman, Revlon Inc.’s executive vice president of human resources, chief legal officer, general counsel and secretary.
“This is consistent with what I have been seeing across the board,” says Russell Miller, managing director at Executive Compensation Advisors, a subsidiary of Korn/Ferry International. “In this difficult economy, companies are holding the line more on bonuses than they had in the past.”
But companies continued to pay out their annual non-equity incentives, which are usually determined at the beginning of the year and are based on performance targets. “Those plans were set up early, before a lot of the things with the economic downturn happened,” Nielsen says. “It’s not something you can change in the middle of the year.”
Equity continued to play a big part in how the top-paid HR leaders were compensated in 2008. Equity awards made up more than 50 percent of total compensation for 14 of the executives on the list.
That trend is in line with past years, but many employers argue that the way they have to disclose stock-option valuations isn’t an accurate reflection of what their executives are getting paid, particularly since so many of those options are now underwater.
Under SEC executive compensation rules, companies have to disclose stock-option grants as they are expensed, but not the price at which their executives cash them in–a rule that has caused much controversy in the corporate world. A spokesman for one HR executive made that point with Workforce Management.
“The vast majority of the amount you have listed are equity options that are substantially underwater–and not a fair reflection of how Mike was compensated in 2008,” J.C. Penney Co. spokesman Quinton Crenshaw wrote in an e-mail response to a fact-checking inquiry on the compensation for Michael T. Theilmann, the retailer’s executive vice president and chief human resources and administration officer. “It’s somewhat misleading to attribute those stock amounts attributed to Mike Theilmann–or any other executive for that matter–as if they have been earned or received already.”
This concern is one shared by many companies. The SEC announced on July 1 that it is revisiting its rule regarding how companies disclose stock-option grants in their proxy statements.
“The number that companies are disclosing is the amount that was granted in a year in terms of the expected value, but the problem is that six months later, a lot of those options are underwater,” Executive Compensation Advisors’ Miller says. “I think everyone recognizes that it’s imperfect.”
Another notable trend among the list of top-paid HR executives is that many hold multiple roles at their companies. Half the executives on the list hold at least one other title outside of HR.
“I can’t imagine that if you are splitting your time that HR is your primary focus,” Nielsen says.
One person whose compensation rose in 2008 is the HR leader who holds the No. 1 spot on the list: Michael H. Campbell, executive vice president of human resources and labor relations at Delta Air Lines Inc. He moved up from the 11th position last year. Campbell’s total compensation jumped from $3 million in 2007 to $5 million in 2008.
“Given the fact that Delta is in the middle of a merger with Northwest Airlines, it’s probably not a bad thing that there is such a big jump in compensation for this person because that’s a big job this year,” Nielsen says.
However, the cut in pay for most HR executives—while in line with other executive positions–is probably painful, she says.
“HR has a very tough job these days dealing with layoffs and consolidations,” she says. “It’s hard to have your job become much more difficult and see your pay fall.”
Workforce Management, August 17, 2009, p. 28-31 — Subscribe Now!
