PPG Industries CEO Charles Bunch benefited from the auto industry's continued recovery in 2013, exercising stock options to top the list of the 35 highest-paid CEOs at publicly traded North America-based automotive companies.
Bunch's total compensation last year was $60,325,172, almost twice his $31,972,707 total in 2012, lifting him from third to first on the 2014 Automotive News/Equilar CEO Compensation Study.
Bunch, like many others on the list, received the bulk of his compensation from stock option and stock award gains. Proxy statements filed with the Securities and Exchange Commission may not reflect similar compensation totals because they often record the value of stock awards or options on the day they are granted, while Equilar Inc., the company that created this list for Automotive News, uses the value of the awards when they are vested and the value of the options when they are exercised.
With a base salary of $1,350,833 in 2013, Bunch received $36,260,245 in stock options -- more than his total compensation in 2012.
The large stock gains for automotive company CEOs reflect the market's performance as a whole, said Aaron Boyd, director of governance research for Equilar.
"The amounts are not surprising because we saw the market do really well last year," Boyd said. "S&P 500 stock returns were around 30 percent. When stock prices are going up, the value of awards that are vesting will be higher, and people will be more likely to exercise their options."
|2013 vs. 2012|
Michael Carpenter, Ally Financial: +5,775%
James Hallett, KAR Auction Services: +991%
Stephen Roell, Johnson Controls: +216%
Alan Mulally, Ford Motor Co.: –78%
Roy Armes, Cooper Tire & Rubber: –73%
Craig Monaghan, Asbury Automotive Group: –57%
PPG stock closed at $55.70, adjusted for splits and incentives, on March 1, 2005, the month Bunch took over as CEO. It closed at $197.17 on May 21, an increase of 254 percent.
TRW Automotive CEO John Plant, No. 2 on this year's list, exercised stock options in 2013 with a gain of $26,708,044 on top of a $2,014,615 base salary. His total compensation last year was $41,854,722, up from $19,694,837 in 2012. When TRW Automotive was spun off from TRW Inc. in February 2004, the stock closed at $27.10 on its first day. On May 21, it closed at $82.13.
KAR Auction Services CEO James Hallett, No. 9 on this year's list, brought his compensation up to $15,419,682 from $1,413,895 in 2012 after selling tens of thousands of KAR shares from March through November 2013. KAR Auction Services is the parent of ADESA Inc.
Not every executive on the list had success in the market. Cooper Tire & Rubber CEO Roy Armes, No. 31 on this year's list, saw a decrease of about $10 million in total compensation after exercising $7,272,176 in stock options in 2012, then exercising none in 2013 as Cooper Tire & Rubber stock was nearly flat for the year.
Ford Motor Co. CEO Alan Mulally slid to No. 10 in the rankings after topping the list last year with a total compensation of $68,443,381. His total compensation in 2013 was $15,398,536.
Mulally did not exercise any stock options and received $6,856,486 in vested stock awards on top of a base salary of $2,000,000.
Though Mulally will step down as CEO on July 1, he has much to gain from stock options if he exercises them. Boyd said Mulally has 5 million shares at a strike price -- the price at which he can buy the stock -- of $1.96.
"He has quite a bit of options he could potentially exercise," Boyd said. "If he were to exercise all of them, that would be quite a bit of money."
Mulally was joined by former General Motors CEO Dan Akerson as the only two automaker CEOs in the top 35. Akerson landed at No. 34 with compensation of $1,766,270, similar to his 2012 compensation of $1,770,149.
Tesla Motors' high-profile CEO Elon Musk did not make the top 35. Though Musk accepts only $1, his salary is listed as $33,280 due to California minimum wage laws. He did not receive the $6,000 bonus from the companywide patent incentive program as he did in 2012.
Boyd said stock value, rather than total compensation, is Musk's primary motivator.
Musk "is focused on growing Tesla and bringing value to investors," Boyd said.
On the whole, CEOs on the list saw a 16 percent increase in bonuses, according to Boyd. Like stock option gains, the boost is a result of the industry's success in 2013.
"It's pretty consistent with what we're seeing in overall growth in total value," Boyd said. "We saw 16 percent growth in total pay for CEOs as well."
Engine supplier Eaton Corp.'s CEO, Alexander Cutler, No. 3 on this year's list, received the largest bonus at $17,504,200, up from $1,650,480 in 2012.
Five executives in the top 35, including Akerson, did not receive a bonus or incentive plan compensation in 2013.
For each executive, total compensation includes base salary, bonus payouts, gains from stock option exercises and the vesting of stock awards and other compensation. Other compensation typically includes benefits and perks.
Base salary, bonus payouts and other compensation values are taken from the Summary Compensation Table, or SCT, of each company's proxy statement. Information on gains from stock option exercises and the vesting of stock awards is taken from the Option Exercises and Stock Vested Table of the same document.
Gains from stock option exercises and the vesting of stock awards do not necessarily mirror the amount that an executive earned from selling stock, if any, during the fiscal year. Once options are exercised and stock awards vest, they may be retained by the executive as common shares of stock.
Total compensation figures in this survey may not match the value reported in the SCT because the SCT includes the grant date value of equity awards, but this survey includes the realized value. This survey also excludes the pension and deferred compensation column from the SCT, which may cause further disparity.
The table also includes the lump-sum value of accumulated pension benefits accrued by each executive, and the year-end balance held by each executive in nonqualified deferred compensation accounts.