JUNE 2,1986___ THREE DOLLARS FIFTY CENTS hig i'l ‘WHY -THE BOSS ESN'T ALWAYS: ‘TI TOP: x " : oD SEANICE PRESIDENT] es g MARWETING RegThe compensation of chief executives is fascinating stuff, to be sure. But first, let’s take a look at some of the folks who take home the really big bucks. The Babe Ruth syndrome ocx stan Michael Jackson will col lect $10 million from PepsiCo over the next three years for doing three 60-second commer cials. That's more than the top executive offi- ‘cers of PepsiCo carn annually, and amounts to the quite ‘considerable sum of $55,556 a second. Nevertheless, rtir ing PepsiCo Chairman Donald Kendall, who was paid a mere $1.8 million in 1985, isn’t complaining, “Everyone here is very excited,” Kendall said at the recent annual ‘meeting. “We think it’s going to be very positive.” ‘There's a point to be made here: I's not just that rock stars, television personalities and Wall Street dealmakers reap outrageous rewards for their efforts. The real point to be grasped is that the people who run our major corpora- tions, while scarcely in want, are at best in the middle ranks of the big earners in out society. Most of them are FORBES, JUNE 2, 1986 ‘Janet Bamford not even rich on the scale of richness that breeds Thor ‘oughbred racehorses, sails yachts and collects costly art. Outearning the boss happens every day in the corporate world, all the way from the lower ranks, where hourly ‘workers on overtime can take home more than their salaried supervisors, to sales reps who can buy and sell their sales managers, right on up to the executive suite. ‘Thanks to exercising stock options, IBM Senior Vice Presi dent George Beitzel, for example, collected $3 million in 1985, Chairman John Akers received only $736,000. In the corporate worl, sales, of course, is the traditional field of the big eamers. Smallish AGS Computers, for cxample, is a $280 million computer hardware and soft- ‘ware firmn that last year paid an executive vice president ‘twice what it did its chairman and its president. Anthony Stepanski made over $600,000 last year, while Chairman usLawrence Schoenberg and President Joseph Abrams each mateallttl over $300,000. “Thave not been close to being the highest paid person for ten Years,” says Schoenberg cheerflly. ‘Nothing temibly new here. More than hal a century ago a club official reminded baseball great Babe Ruth that he made more that year than President Herbert Hoover di. Ruth quipped back: “Thad a beter year than he did.” ‘Comdiseo, a computer leasing and tax shelter firm, also pays its staff well. In 1985 founder and Chairman Ken Pontikes, who is paid $250,000 plus a commission of 4% on the fitst $20 million of pretax earings and 1% there: ater, made $1.4 million. ‘He was outeared by Frank Tranadel, a senior vice president whose $150,000 base salary was boosted to $2.1 million by his bonus and stock options. Trznadel’s compensation also put him well above Executive Vice President Michael Brown. "We're a litle like the securities industry,” says Pontikes, “We have afee business and pay people who can arrange deals.” Comaisco’s compensation notions do raise some hack- les with shareholders, however. When it became public in 1982 that four of Comdisco’s executives had been paid over $1 million each, a shareholders’ lawsuit was prompt ly filed, charging excess compensation. Comdiseo settled the suit, among the provisions was a cap on certain cffi- cers! compensation. Ken Pontikes cannot, for example, make moze than $2 million in a year. Ms "New York Knicks star center Paice Ewing's contract § worth fan estimated $16 million over six years, Guif & Wesern Chairman Martin Davis (abone) was paid $72 million last year ‘Ah, Wall Street, Martin Shatiroff, a Manhattan- based Shearson Lehman Brothers broker, reported ly generated in excess of $10 million in gross ‘commissions last year, his take was in the neigh othood of 40%. (Neither Shafiroff nor the firm ‘would comment] That’s more than Peter Cohen, Shearson Lchman chairman (82.9 million) or James Robinson, American. Express chairman ($1.86 million), eamed in 1985. ‘The top three brokers at Mersll Lynch last year each eamed well over 81 million in commis- sions—in the same neighborhood as Chairman William Schreyer ($1.6 million} and Chief Operat- ing Officer Daniel Tully ($1.3 million} Few begrudge these producers their rewards. “Are you asking f'm jealous?” asks one Manhat tan brokerage house branch manager. "I ha some of the highest earners in the country here Don’t feel sorry for me. Ido fine." (He gets by on about $400,000.| Realestate, of course, has also been hot lately. William Meyersohn, a 45-year-old Miami agent with Merrill Lynch Realty, sold over $19.6 million of real estate last year. That eamed him over $700,000 in commissions, according t0 a survey by Real Estate SalesPecple, a trade publication. That doesn’t even include the estimated $700,000 he stands to collect on one sale alone—a 340-acre estate in Biscayne Bay that sold for $22.5 million. "'m very good at motivat ing myself,” says Meyersohn. Merrll’s Dakin Ferris, who ‘was chairman of the firm’s real estate group until ast June, eared only $601,400 last year. Mergermania also has helped to line a lot of executives’ pockets, in salary as well as stock options. “In corpora tions, Ike to say that you find people making more than their bosses when they're hired, fied or acquired,” says Michael Emig, a compensation consuleane with the Wyatt Co. “If they're hired, and it takes an amount to attract them, if they're fired, and they receive a gencrous settle ‘ment, or if their company is acquired, and the two firms have different salary structures.” If you're lucky enough to turn the head of a company owner ot founder who is looking for a new number one, you can often name your own ticker—and even take home more than he does, Robert Swanson, one of Genentech’s founders and now chief, made $285,000 last year. That was far less than the $421,000 he paid G. Kirk Raab, whom he FORBES, [UNE 2, 1986(above) earned $1.86 millon but was out: ‘aaced by Peter Coben ($2.9 milion), chief of ‘Shearson Lebmnan Brothers, owned by AMEX hired away from Abbott Laboratories. Cetus, the California biotechnology firm, brought in Dr. Robert Fildes as president and chief operating officer in 1982. Fildes, now chief executive off cer, made $280,000 last year, while Dr. Ronald Cape, founder and chairman, eamed only $255,000. ‘Tandon Corp. recruited two ex-IBM executives last No- vember with lucrative contracts, Dan Wilkie, now Tandon president, has a contract with a base salary of $270,000, an upfront sign-on bonus of $100,000, relocation benefits and a subsidized mortgage loan, as well as a golden parachute, which, if activated, will pay three times his annual salary. HLL. (Sparky) Sparks set up IBM’s personal com- puter distribution network and did a stint at ‘Compaq as marketing vice president before join- ing Tandon as a senior vice president. Sparks gets $200,000 annually, a hiring bonus of $120,000 and $31,000 toward relocation. Both ‘men outeamed Sirjang Tandon’s $275,000 com- pensation as chairman, Tandon, of course, is not just being generous: ‘As owner of 9.3% of the company's stock, he will benefit handsomely if his new associates pan out. Similarly, Warren Buffett paid Berkshire AGS Computers Chairman Lawrence ‘Schoenberg left) earned $308,756; balf ‘as much as Brecutive Vice President “Anthony Stepanski, with $616,731 FORBES, JUNE, 1986 Hathaway Vice President Michel Goldberg $600,000 last year, while his own compensation was a mere $100,000: And Leon Hess’ $200,000 compensation is ower than that of the other four officers listed in the ‘Amerada Hess proxy statement, (Their pay ranged from $310,000 to $485,000.) ‘Acquisitions can bring about strange compensation ar- rangements. At Minneapolis’ Norwest Corp., a $21 billion ur(assets) bank holding company, Vice Chairman Richard Levite eamed over $780,000 last year, while his boss, Chairman and Chicf Executive Officer Lloyd Johnson, made $632,610. How come? When Norwest acquired the consumer finance company Levit headed, in 1982, it itave heen paid had he remained at the helm of the inde pendent corporation. ‘When the acquisitions are on a grand scale, so are the salary distortions. By the time General Electric absorbs both RCA and Kidder, Peabody, chances ate pretty good that GE Chairman John Welch (who camed $1.6 million last year) may not even be on the list of the corporation's top ten money eamers, ‘As commercial banks have expanded into trading and hhave begun building their investment banking capability, they, too, are finding they have to pay the going rates to attract the top talent, New York’s Chemical Bank refuses to comment on the compensation package that was put together to lure Timothy Tabor to run the bank’s arbitrage ‘operations; sources say that, with incentives, it could top Chairman Walter Shipley’s $1 million. ‘At Bankers Trust,” says Thomas Parisi, a senior vice president, “in the mid-1970s we made a judgment that in Order to build a wading operation, we had to pay compen- sation that would be equal to Salomon Brothers and Gold. man, Sachs. Several people made more than the chairman and the presidene this past year in trading and investment banking areas, [Bankers Trust Chairman Alfred Brittain IL rade $1.4 million in 1985,] That's nota big deal around here anymore ‘Surprisingly, as a stockholder of a public company, you can never realy know for sure who the top carers are. As Securities & Exchange Commission regulations. now stand, companies have to diselose only what the top five corporate officers made (if they were paid over $60,000}. But there can be armies of nonofficers, especially in the sports, sales, entertainment and communications fields who make more, sometimes much more, than the guy at the op. “think probably, when the SEC regulations were writ ten, the assumption was the officers of the corporation ‘were the bestpaid people,” says Joel Seligman, 2 George Washington University law professor who wrote a history of the SEC. The assumption is, 0 put it mildly, utterly out of date. Anchor, dunk or joke hief executives of publicly held sports, entertain- ‘ment and communications companies are almost. always outeamed by the hired help. CBS Chairman ‘Thomas Wyman, forexample, made $1.1 millionin 1985, about half what Dan Rather pulls in for anchoring the evening news. Even Phyllis George, who was released from CBS Morning Neus last yearafter nine monthson the jb, still collects just under $1 million a year and will continue to collect about the same in 1987. Even a local news anchor on ABC’s New York station outearns Thomas Murphy, chairman of Capital Cities/ ‘ABC (who earned $709,000), and John Sias, new ABC ee ee ae Roger Grimsby was getting over $700,000 a year unti released he has another year on is contract Plenty of jocks make more than the owners of their teams, Patrick Ewing, the 7-foot sensation of the New York Knicks, makes an average $2 million-plus a year, GW Chairman Martin Dayis made $1.2 million in 1985. Atlanta Braves outfielder Dale Murphy cams $1.8 million; Braves owner and Tumer Broadcasting System. head Ted Turner made abit over $300, 000 last year. ‘AtRCA, soon to be owned by GE, no one earns more than the redoubtable Johnny Carson, who keeps his ex wives in ermine, thanks to a reported annual compen: sation of $5 million. Even former fillin Joan Rivers has been touched by Midas; her new contract with Rupert “Murdoch's Fox Broadcasting Co. is said to be worth $10 million over three years, which puts her in the highest ‘echelons of Murdoch's multiple mastheads and organi- zation charts, As they say: You have got to spend ‘money to make money —J.B. Fox Broadcasting’s ew superstar Joan Rivers(let) | ‘wll make an eximated $10 million over three years, Neus ‘America, which ‘owns Fox, pad Chairman Rupert Murdoch $530,000 last. FORBES, JUNE 2, 1986