Vectrus Inc., CEO Chuck Prow is interviewed Tuesday, May 31, 2017, in his Colorado Springs office. (The Gazette, Christian Murdock)
Last year was good to the CEOs of two of the three public companies based in Colorado Springs.
Compensation increased for all of the top executives except for Jason Reid of Gold Resource Corp. The overall total declined, however, because last year’s total was inflated by severance payments to one former CEO.
The three CEOs of Century Casinos Inc. and Vectrus Inc. – Century has two co-CEOs – received raises of at least 40 percent last year, according to proxy statements filed with the Securities and Exchange Commission, while Reid’s pay fell nearly 30 percent.
The overall total fell 17.2 percent from 2016, to $5.82 million in combined compensation. Notably, the 2016 total included $3.23 million to former Vectrus CEO Ken Hunzeker, including $1.2 million in "cash termination pay" awarded in 2016 but mostly paid in 2017 and 2018.
Two Colorado Springs companies no longer are included in the comparison: Spectranetics Corp. was acquired in August by Royal Philips for $2.2 billion, while Tracker Capital Management, a New York-based private venture investment firm, bought the assets of root9B Holdings in September after creditors foreclosed on all of root9B’s assets.
Local CEOs took home an average of $1.45 million last year, up 12 percent from 2016, when the average rose 14 percent. The 2017 average is still $700,000 less than the record average of $2.15 million local CEOs received in 2014, though that total was inflated by multiyear stock options paid to three of the four CEOs.
The average pay for local CEOs is just a fraction of the median pay package of $11.7 million received by the CEOs for companies included in the Standard & Poor’s 500 stock index, according to compensation data analyzed by Equilar for The Associated Press. The analysis found that the nation’s top-paid CEO last year was Broadcom’s Hock Tan at $103.2 million, mostly from a $98.3 million in stock grants. Colorado’s top-paid CEO was Gregory Maffei of Liberty Media and Quarte Retail Group (formerly Liberty Interactive), who took home $67.6 million.
A separate study by Equilar found that median pay for the CEOs of the nation’s 100 largest companies rose 5 percent to $15.7 million, while another study by Institutional Shareholder Services Inc. found that the median pay for CEOs of 166 companies in the S&P 500 was up 9.5 percent.
Still, local CEOs earned as much in a week as the typical worker in their companies earned all year, according to ratios public companies were required to include this year in their proxy statements for the first time.
That ratio was 45.8 to 1 for Vectrus, 49 and 50 to 1 for Century’s co-CEOs, but just 4 to 1 for Gold Resource’s CEO since most of the workers in the company’s mines are employed by contractors. As a result, Reid is mostly being compared with other company executives.
Those ratios are still less than a third of the typical CEO in the Equilar analysis, which showed earnings of 164 times the median pay of their employees. The ratios vary widely from restaurant chains that employ a large number of part-time workers to technology and financial companies, where six-figure salaries are common and pay includes bonuses and stock options. Elsewhere in Colorado, The Denver Post reported recently that ratios ranged from zero for former Re/Max Holdings CEO Dave Liniger, who didn’t take pay, to 814 times for former Chipotle Mexican Grill CEO Steve Ells.
The comparisons are required by the Dodd-Frank Act – enacted in the wake of the financial crisis to rein in the banking industry – and also include giving shareholders an advisory vote on executive pay. Those provisions survived despite legislation, signed into law last month by President Donald Trump, that eased some Dodd-Frank provisions.
An analysis by the AFL-CIO, which uses different calculations than the company-specific ratio required in Dodd-Frank, found that the average CEO of an S&P 500 company made nearly $14 million, or 361 times more than the average production and nonsupervisory worker, who earned $38,613. The ratio was 347 to 1 in 2016.
The compensation gains came as the stock of all three local companies gained ground last year from the end of 2016. Gold Resource shares edged up 7 cents, or 1.9 percent, to $4.39, while Century’s stock rose 90 cents, or 10.9 percent, to $9.13. Vectrus shares surged $7, or 29.4 percent, to $30.85.
Earnings of the three companies were mixed. Vectrus profits more than doubled to $59.5 million, or $5.31 a share, mostly because of a corporate tax cut enacted at the end of last year. When the effects of the cut are subtracted, the defense contractor’s earnings were up just 3 percent, to $24.4 million, or $2.16 a share.
The tax cut hurt Century and Gold Resource because it reduced the value of tax benefits on the balance sheet of both companies, making those tax breaks less valuable, The combined hit for the two companies totaled $12.7 million. Without the tax writeoffs, both companies would have reported earnings gains in 2017.
Here is a summary of local CEO pay:
– Vectrus: Prow’s pay more than tripled to $2.18 million, but he took the job in December 2016 and received just $32,309 in salary that year plus $600,000 in stock awards. Last year, he received $600,000 in salary, $720,002 in stock awards, $180,002 in option awards, $619,800 in incentive plan compensation and $55,701 in other compensation, mostly a housing allowance.
– Century: Co-CEOs Erwin Haitzmann and Peter Hoetzinger received $608,150 and $609,107 in salary, respectively; $404,641 each in stock awards; $263,487 in incentive plan compensation; and $86,074 and $70,568, respectively, in other compensation for health and life insurance premiums and car allowances.
– Gold Resource: Reid’s salary remained unchanged at $600,000 but his bonus and stock awards were both cut in half to $150,000 and nearly $75,000. His option awards were reduced from $235,226 to $99,440 and other compensation fell from $18,688 to $5,766. That category included gold and silver coins in 2016 but not in 2017.
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