CEO paychecks fatter
By Rick Daysog
Advertiser Staff Writer
When Hawaiian Telcom, the state's largest phone company, lured Michael Ruley away from a Houston telecommunications company last year, it spared little expense.
Hawaiian Telcom's new chief executive received about $1.9 million last year, including $254,314 in moving expenses and $750,000 in bonuses.
Ruley's 2005 pay package was not out of line with the lucrative compensation packages offered to other top CEOs in Hawai'i.
Ruley was the third-highest-paid CEO behind Alexander & Baldwin Inc.'s Allen Doane, who earned nearly $4.9 million last year, and Bank of Hawaii Corp.'s Allan Landon, who received nearly $4 million, according to an Advertiser study of executive pay at publicly traded companies.
The study, based on filings with the Securities & Exchange Commission, found that average pay for chief executives in Hawai'i was about $1.7 million last year. That's equivalent to $4,500 a day, or about 23 times the median household income in Hawai'i and represents a 13.4 percent increase from the average CEO pay of $1.5 million in 2004.
BOOM TIMES HELPFUL
Compensation experts say the growth in local CEO pay is a reflection of Hawai'i's booming economy, which has seen record visitor arrivals, soaring real-estate values and low unemployment.
"It's typical to see CEO pay go up with the economy, and particularly when the companies' performances are up," said Bill Coleman, senior vice president of compensation at Salary.com, a Needham, Mass.-based company that specializes in employee pay data.
Six of the heads of Hawai'i's largest publicly traded companies earned raises while three received pay cuts last year. Eight CEOs earned more than $1 million last year, including Ruley and:
"Running an airline these days is extraordinarily challenging," said Hawaiian chairman Lawrence Hershfield. "The fact that Hawaiian was one of only three carriers nationally to report an operating profit in 2005 and led the industry in service reliability is a credit to the company's management team and Mark Dunkerley's leadership as CEO."
The growth in local executives' pay this year largely mirrors modest growth of paychecks for Mainland CEOs.
A preliminary report by The Corporate Library, a Portland, Maine, corporate governance watchdog, found that CEO compensation nationally rose a median of 11.3 percent in 2005, which was well below the 30.2 percent growth rate the previous year, Bloomberg News said.
PAY TIED TO BOTTOM LINE
Executives compensation, which is usually set by a committee within a company's board of directors, generally is based on the local company's bottom line. In most cases, profits were up last year as Hawai'i's economy was booming.
Alexander & Baldwin, a shipping and real-estate company, saw its net profit rise 22.7 percent last year while its stock was up more than 28 percent to $54.24 per share.
"It's hard to fault a CEO who's pay increased a lot because the company's stock price increased," said Salary.com's Coleman.
Bank of Hawaii, whose earnings were up 10.9 percent last year, also rewarded its CEO, Landon, for the company's performance.
According to the company's proxy statement, Landon received more than half of his pay, or nearly $2.4 million, as restricted stock and other long-term incentive pay.
Hawaiian Airlines' Dunkerley may have experienced the most challenging year for any of the CEO listed in this year's pay survey.
Dunkerley became Hawaiian's top boss in June just as the airline emerged from bankruptcy protection. Since then, the airline has struggled with soaring fuel prices and increased competition on its Mainland routes but managed to report a small operating profit last year.
In June, the airline will face new competition in the interisland market from low-cost carrier Mesa Air Group Inc., which will charge as little as $39 on some one-way fares.
Dunkerley's salary was modest compared to what his predecessor, Bankruptcy Court-appointed trustee Joshua Gotbaum, was seeking. Gotbaum attracted heavy criticism from Hawaiian's employees, management and investors when he asked Bankruptcy Judge Robert Faris to approve an $8 million "success fee" after the airline emerged from bankruptcy.
In November, Faris awarded Gotbaum $250,000 and called Gotbaum's $8 million request excessive.
"It's a lot like professional athletes: They ask for it because they think they can get it," said Coleman of Salary.com.
"But judges don't get paid $8 million, so they would find it hard to justify that the amount is necessary or appropriate."
Reach Rick Daysog at rdaysog@honoluluadvertiser.com.
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