Western Pennsylvania chief executive officers take pay cut
Mylan NV CEO Heather Bresch took a 27 percent pay cut last year, but her $18.9 million compensation package was still large enough to make her the highest-paid CEO in the Pittsburgh area in 2015.
Bresch, who runs one of the world’s largest manufacturers of generic drugs, ranks as the eighth-best-paid female CEO among America’s largest corporations.
The 10 highest-paid chief executives at companies based in Western Pennsylvania or with significant operations in the region saw their pay decrease 11 percent as a group, according to a Tribune-Review examination of Securities and Exchange Commission filings, largely because of a drop in compensation for some executives in the downtrodden metals and energy industries.
While executive pay is increasingly being linked to company performance, some CEOs who received a boost in compensation from stock awards and incentive plan payments, in addition to a salary, represented publicly traded companies that struggled last year.
EQT Corp. paid David Porges $12.1 million last year, a 38 percent raise over 2014, even as the energy company’s financial results were hammered by weak natural gas prices. Porges’ compensation bump was helped by a $1 million bonus he received for the successful spinoff of the company’s pipeline assets. The CEO also received a bigger payout in stock, plus $2.1 million from the company’s cash incentive plan.
Companies are doing a better job of linking pay to performance, but corporate boards are looking to incentivize long-term gains, said Dan Marcec, director of content at Equilar Inc., a company that tracks executive compensation. That can lead to situations where an executive’s compensation may appear rosier than what should have been awarded based on a company’s short-term performance, he said.
Marcec cited the struggling oil and gas industry as an example. A downturn in demand and energy prices has decimated profits for oil and gas drillers, but some CEOs have minimized the impact by making their companies more efficient and well-positioned for a recovery.
“These market factors are not controlled by the executives,” Marcec said. “The revenue being down isn’t necessarily tied to something they’re doing as CEO.”
Stock awards vest over time, which is meant to give CEOs an incentive to produce long-term gains, he said. “That’s why you’re seeing these big payouts.”
While Bresch led the list of highest-paid CEOs in Pittsburgh, she didn’t have the largest pay package for the region’s executives. Charles Bunch, who became executive chairman of paint producer PPG Industries Inc. last year after a decade as CEO, received $30 million in total compensation in 2015, up from $21.6 million in 2014. Bunch was not included in the Trib’s top 10 ranking because it focused on CEOs. Michael McGarry, who replaced Bunch as CEO of PPG, received $6 million in total compensation last year, which would rank him as the 15th highest-paid CEO among Pittsburgh companies.
Fewer corporations are paying bonuses to their executives, preferring instead to reward management through incentive plans that are supposed to be earned by boosting company performance, typically through hitting targets for higher sales, profits and stock price.
Ansys Inc., a Cecil-based software maker, also paid bonuses last year, including $638,000 to CEO James Cashman III. Cashman’s total compensation leaped 89 percent to $10 million thanks to stock awards valued at $8.6 million, which were more than double the value from a year earlier.
Other companies cut incentive plan pay because of poor performance.
U.S. Steel Corp. CEO Mario Longhi took a 35 percent pay cut last year after not receiving any money from the struggling steel producer’s cash incentive plan. U.S. Steel recorded a $1.5 billion loss in 2015 as depressed prices and a flood of cheap imports hurt the company’s sales. The company’s stock price declined 68 percent during 2015.
Fellow steel industry CEO Richard Harshman fell out of the top 10 ranking after Allegheny Technologies Inc. eliminated his incentive payment, leading to a 14 percent reduction in compensation.
The aluminum industry also struggled with weak prices, and Alcoa Inc. paid CEO Klaus Kleinfeld 4 percent less last year by reducing his incentive payment to $1.8 million, down from $3.4 million. But Kleinfeld’s $17.5 million in total compensation was big enough to rank him as the second-highest-paid chief executive last year.
While Porges received a raise, chief executives at other energy companies received lower compensation. Consol Energy Inc. paid Nicholas DeIuliis 7 percent less, and the CEO dropped out of the top 10 — to 11th from ninth in 2014.
Jeffrey Ventura, CEO of Range Resources, took an 8 percent cut but remained ranked No. 7, unchanged from the year before.
Rice Energy Inc. CEO Daniel Rice IV fell the furthest in the ranking. His 2014 compensation of $19.1 million was high enough to be ranked No. 2. But his pay that year included more than $15 million in stock awards related to the company’s spinoff of pipeline operations. In 2015, Rice’s total compensation dropped to $3.3 million, ranking him 24th in the region.
Mylan, which is based in the Netherlands and run from offices in Cecil, paid Bresch less in 2015, in part because she had received a one-time $13 million stock-option award in 2014 that boosted her pay that year to $25.8 million. But she received an extra $5.8 million in 2015 when Mylan covered tax bills for executives after the company moved its corporate address to the Netherlands. The tax-lowering move, known as an inversion, required all shareholders to pay capital gains tax on the value of their stock at the time of the deal.
While Bresch may have topped the list of highest-paid CEOs in the Pittsburgh region, female chief executives remain relatively rare in corporate America. A recent report by S&P Global Market Intelligence highlights the gulf between words and actions in hiring women as CEOs.
“Despite all of the attention placed on increasing the number of female executives at American companies, the needle on the gender gap has hardly moved,” wrote the report’s author, Pavle Sabic.
Sabic looked at the entire Standard & Poor’s 500 index from 2006 to 2015 and found the number of female CEOs rose from 16 to 21 — an increase of one new female CEO every two years.
“The gender gap at the CEO level … is not closing,” he wrote.
Alex Nixon is a Tribune-Review staff writer. Reach him at 412-320-7928 or firstname.lastname@example.org.