Senior Execs Get Raises, Greater Scrutiny of Pay

  Many senior payments-industry executives received significant boosts in their total compensation packages last year. Overall, the median total compensation for top executives appears to have declined 23% last year, to $2.3 million from $3 million in 2005, according to exclusive data supplied to Cards&Payments by Standard & Poor's.
  But some of the apparent declines could be the result of new U.S. Securities and Exchange Commission rules for how companies report executive compensation. The new rules still require corporations to provide a single figure for all executive compensation. But bonuses and options are calculated differently from how they were in previous years, which has affected year-over-year comparisons for some companies and executives.
  Despite these adjustments, the overall effect of the new disclosure rules has been positive, say executive compensation experts. Corporate proxies now contain specific information about retirement and severance benefits and the criteria used for performance-based pay and bonuses.
  There is also new transparency in describing corporate leaders' perquisites, so those digging deep into corporate proxy statements can get a clearer picture of what goes into an executive's compensation package.
  Although compensation figures are now organized differently in company SEC filings for 2006, the basic components of executives' compensation packages are same, says Nora McCord, an executive-compensation analyst with New York-based Steven Hall & Partners.
  "The information about bonuses and incentives is simply showing up in new places on the proxy statements, and there is a learning curve for this analysis," she says. "As the dust settles, over the next year or two it will be easier to compare year-to-year performance under the new disclosure rules."
  Over time, the new disclosures about performance objectives should improve competition and provide fairer pay within the payments industry, says Kimberly Bishop, a credit card industry veteran who is now a senior client partner with Korn/Ferry International, a New York-based recruiting firm. Bishop joined Greenwood Village, Colo.-based First Data Corp. in 1989 and rose to become executive vice president of its card issuing services division before leaving in 2005 to join Korn/Ferry.
  "Long-term incentives for senior-level executives are shifting from stock options and restricted stock to performance-based shares," says Bishop. "These shares are earned by achieving multiyear performance goals, based on very specific metrics that are usually spelled out in great detail.
  Kenneth Chenault, chairman and CEO of American Express Co., tops C&P's list of 2006 earners with a total compensation package of $22.3 million (see chart page 30). Richard Fairbank, chairman and CEO of Capital One, was No. 2. As he has done in the past, Fairbank took home no salary or bonus pay but earned $18.1 million in stock options last year.
  Details about corporate perks no longer are hidden from the public eye. The 2006 proxy statement from eBay reveals that President and CEO Margaret Whitman racked up $775,000 in personal travel benefits last year. AmEx's proxy statement shows that in 2006, Chenault's use of the company's jet amounted to $405,375 and that his company-car perks exceeded $130,000.
  Executive recruiters and compensation experts say the SEC's new reporting rules and the movement toward performance-based pay are raising the stakes for payments-industry executives.
  "With heightened emphasis on performance, companies are quicker to get rid of nonperformers," McCord says. "Executives have a shorter time now to prove themselves than in the past."
  MERGER EFFECT
  Consolidation among banks and credit card companies within the past two years also has narrowed the total number of senior leadership jobs available in the payments industry, says Daina DiVeto, managing director of Card Resource Group Inc., a Lynden, Ontario-based executive search firm specializing in payments industry placements.
  "The mergers have slowed, but we're still seeing their effect," she says. "Fewer companies means fewer CEO jobs in the traditional card industry."
  The emerging payments arena is where new leadership jobs are being generated now, DiVeto says.
  "Prepaid, debit card and e-commerce payment companies are all looking for top talent, and in many cases they are hiring seasoned executives from card companies," DiVeto says. "Where opportunities have flattened within traditional credit card companies, there is a tremendous excitement and buzz about jobs emerging in new-technology payment companies."
  Analytic skills are more important than ever for senior-level executives seeking top jobs, says Jerry Bernhart, president of Owatonna, Minn.-based Bernhart Associates Executive Search, which specializes in placing top marketing executives at credit card and other payment companies, including at MasterCard Worldwide.
  "In the top marketing jobs at card companies, it's less about creativity and all about analysis, accountability and proving return on investment," he says. "The new chief marketing officer comes armed with knowledge of new media, new technologies and how to leverage data."
  The need to stay knowledgeable about fast-changing payment technologies, plus the movement toward pay for performance, means that top jobs will go to smart, charismatic leaders, says Korn/Ferry's Bishop.
  "The new chief officer-level executive in this field must be outstanding in two areas," she says. "One is the ability to find, develop and retain talent; the ability to nurture talent is becoming one of the most crucial differentiators for top executives. The other area is the ability to achieve a participatory style of leadership within the senior team while still being able to work quickly through complex decisions."
  Consolidation among credit card companies and banks may mean fewer CEO jobs available in the payments industry. But there still is a plethora of top leadership roles for executives within those larger organizations, Bishop adds.
  "Instead of leading the company, an executive might be leading a division or a specific business unit," she says.
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