Thrift Execs' Raises Reflect Poor Results
Pay raises for the nation's top thrift executives continue to shrink, reflecting the industry's poor performance.
Cash compensation for chief executives at 360 publicly traded thrift companies rose 6% last year, according to SNL Securities Inc. That's down from 7% in 1989, 9% in 1988, and 15% in 1987. (See table on page 8.)
|A Descent from Dreamland'
"We've seen a descent from dreamland to reality on thrift salary increases," said Reid Nagle, president of the securities and research firm based in Charlottesville, Va.
The smaller pay increases match a steady downturn in profitability. The median return on assets at the 360 companies last year was negative 0.44%, meaning a loss of 44 cents for every $100 of assets. That follows a return on assets of negative 0.01% in 1989, positive 0.46% in 1988, and positive 0.57% in 1987, according to SNL.
"There is a realization by directors and chief executives that a CEO's pay must better reflect performance," said Jon Rosenbaum, director of compensation services at MCS Associates, a consulting firm based in Irvine, Calif. "This also reflects added pressure from regulatory agencies."
SNL's survey includes salary and bonus, but not stock options. A shrinking bonus can be recouped if a company's stock price goes up and options are exercised at a profit.
Although most of the executives' salaries are set in advance, SNL said most include a bonus component that does allow the board set pay that reflects the institution's most recent financial performance.
Park T. Adikes, chairman and chief executive of JSB Financial Inc., Lynbrook, N.Y., was the biggest winner last year in the thrift compensation sweepstakes. His compensation soared 53%, to $960,500. JSB, whose $1.6 billion in assets ranked it as the nation's 150th-largest thrift company, posted a 0.72% return on assets and tangible capital of 16%. Mr. Adikes could not be reached for comment.
Rewards for Failure
Some thrift executives managed big raises even as their institutions continued to falter.
Maurice L. Reissman, president and chief executive of Crossland Savings, New York, got $702,615 in 1990, a 16% increase. Meanwhile, the company's losses widened to $421 million, from $191 million, as it got caught in the slumping northeastern real estate market.
A spokesman for Crossland, which has $11.2 billion in assets, said Mr. Reissman's pay was frozen this year and regulators must approve any additional increase.
Some executives at unprofitable thrift institutions who got substantial pay increases were brought in as turnaround specialists under contracts that specified the increases.
Thomas A. Cooper, president and chief executive at Goldome, Buffalo, saw his compensation rise 36%, to $1 million. The $11.3 billion-asset company was seized by regulators this month and sold to KeyCorp, Albany, N.Y., and First Empire Corp., Buffalo. Mr. Cooper, a former president of Bank America Corp., was hired two years ago to turn around Goldome's sagging fortunes.
At Meritor Savings Bank, Roger Hillas' salary rose 4.3% while the Philadelphia-based company's losses widened to $208.6 million, from $55.6 million.
Mr. Hillas was hired from PNC Financial Corp. in June 1988 and got a contract to match what he had been earning at the Pittsburgh-based banking company, said a spokesman for Meritor, which has $6.5 billion in assets.
Kim Fletcher, chairman of ailing HomeFed Corp., San Diego, took the biggest pay cut. His salary was slashed 26%, to $543,442, as his company's health deteriorated markedly. Mr. Fletcher retired in January as an executive of HomeFed, which has $18.3 billion in assets.
Voluntary Pay Cut
George P. Rutland, chairman and chief executive of Northeast Savings, Hartford, Conn., earned $531,999 last year, the same as in 1989. But he voluntarily cut his pay by $50,000 this year to reflect the company's deteriorating profits and stock performance.
"The shareholder is taking it on the chin; I've got to as well," said Mr. Rutland, who joined Northeast almost three years ago.
James Montgomery, chairman and chief executive of Great Western Financial Corp., based in Beverly Hills, Calif., last year remained the highest paid thrift executive. His salary was up 4.1%, to $1.4 million.
Great Western, the nation's second-largest thrift company, with $39.4 billion in assets, last year reported a return on assets of 0.49%, up from 0.28% in 1989.
Bankers Typically Paid More
Not surprisingly, top executives of commercial banks generally are paid much better than their thrift counterparts. Median pay for thrift CEOs in 1990 was $184,000, according to SNL. That's 42% less than the median $319,000 salary paid to chief executives at 361 publicly traded commercial banks last year. The median pay increase for the bank CEOs was 5%.
However, the median thrift in the SNL survey last year had $504.8 million in assets, about half as much as the median bank. Bankers are paid more because the publicly traded banks also are more profitable and have more diverse product lines than thrifts, Mr. Nagle said.
The banks posted a median 0.46% ROA last year. [Tabular Data Omitted]