Now that most municipal bond insurance companies are publicly held, investors sizing up the industry have easy access to an area company executives prefer to keep under wraps: their salaries.

Such information frequently finds its way around the market as fodder for gossips, but the Securities and Exchange Commission's requirement that top salaries be publicly disclosed is motivated by factors more noble than prurience.

Equity investors demanded and won the right to see the information in order to determine for themselves whether key executives are being paid in accordance with the company's performance and in line with the stock market's valuation.

For the municipal bond insurance industry, where profits are breaking records and stock prices continue a steady climb, salaries appear to be keeping pace. A Bond Buyer survey found 1992 compensation packages for chief executives range from a low of $438. 100 for Michael Djordjevich at Capital Guaranty Insurance Co. to a high of $2.2 million for Michael E. Satz at Capital Reinsurance Corp.

The numbers correspond to profit increases at the two companies of 5% and 36%, respectively.

The trouble arises when salaries jump and performance slips.

ITT learned that lesson in 1990, when it dished out an $11.4 million pay package to its chief executive officer. Rand V. Araskog. Disclosure of the sum sparked an unprecedented revolt among shareholders, who demanded an explanation for a 100% salary increase at a time when the company's stock had fallen dramatically.

The fallout forced ITT to revamp the way it compensates its best-paid executives, linking it more closely to stock and profit performance.

Shareholders appear to be an even-handed bunch, however. Last year, Roberto Goizueta of Coca-Cola took home nearly $80 million in stock options, salary, and bonuses in his role as chief executive officer. The amount won him the dubious distinction of being Fortune magazine's "compensation king" for the year. But shareholders, buoyed by soaring stock prices. gave Goizueta a standing ovation at the company's annual meeting.

It's tough for us to argue" with high salaries when they correspond with good performance, said Anne Hansen. deputy director of the Council of Institutional Investors, a trade group that represents shareholder interests.

The group considers itself a watchdog on issues like executive compensation and has become a thorn in the side of chief executive officers around the nation.

It was into this atmosphere of increased scrutiny that one more of the bond insurance industry's eight major players, Financial Security Assurance Co., last month announced plans for a public stock offering. The move will bring to six the number of companies publicly held and subject to salary disclosure requirements.

Capital Guaranty completed its initial public offering in August. The industry's two major reinsurers, Capital Re and Enhance Financial Services Group, sold stock in 1992.

AMBAC Inc. and MBIA INC., the two largest players in the industry, have both been publicly held for several years.

Rounding out the industry are two privately held companies, Financial Guarantv Insurance Co. and Connie Lee Insurance Co. Although the pair do not have shareholders to worry about, regulators in a handful of states do require them to detail executive compensation packages.

Option packages skew the figures somewhat. Satz's $2.2 million package, for example, included 140.000 options awarded when the company went public last year. Using the so-called Black-Scholes model of option valuation. one of the most common methods of assigning a present value to options, Satz's award was worth about $1.5 million, or nearly 70%, of his entire 1992 pay.

Similarly, Philip B. Lassiter of AMBAC was awarded options worth at least $2.5 million in 1991, according to a Bond Buyer estimate of the options' present value. The amount pushes Lassiter's compensation to $3.4 million for the year, compared to $869,000 in 1992.

But a spokeswoman for the company said that a large portion of the 1991 option award was the result of Citicorp's divestiture of AMBAC that year. Lassiter, previously an executive at Citicorp, owned numerous Citicorp options that would have been rendered worthless upon his departure to run AMBAC.

To compensate him for the loss, the spokeswoman said, Citicorp awarded Lassiter about 103.000 options in AMBAC'S new stock.

Another factor affecting executive compensation in 1992 was a one-time payment made to Oliver R. Sockwell, chief executive officer at Connie Lee. A spokeswoman for the firm said the $745,000 figure Connie Lee reported to the Nebraska insurance department this year was "nowhere near" Sockwell's salary in a normal year. Nebraska is one of the few states that requires insurance companies operating in the state to report executive compensation.

The Connie Lee spokeswoman said the one-time payment dramatically boosted Sockwell's take for the year, but she declined to say what the payment was for or what the executive's salary looks like in a more typical year.

A spokesman for FGIC said Ann C. Stern, the company's chief executive officer. earned $725.000 in 1992, including salary bonuses. and other compensation. That compares to $661.000 in 1991, the spokesman said.

The company's Nebraska filings show higher figures because they include options and long-term incentive plan payments from previous years that were actually paid out in 1992, the company said. Officials at publicly held companies are permitted to make the same distinction in their SEC filings.

Unlike the tangle facing ITT in 1990, the municipal bond industry's chief executives have a strong argument in defense of high salaries --record earnings and strong stock gains.

AMBAC and MBIA, the only two companies with stock outstanding at the end of 1991, enjoyed stock price increases of 23% and 30%, respectively,by, the end of 1992.

Despite the rise, David H. Elliott, chief executive officer at MBIA, saw his compensation slip slightly for the year. to $1.5 million from almost $1.6 million in 1991. And Lassiter, because of the huge option package in 1991. saw his package decline nearly 75%.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.