Hawaii’s $3M CEO club grew last year with pay packages

Membership in Hawaii’s exclusive $3 million CEO club doubled from three to six in 2016.

And one of the newcomers wasn’t even a chief executive officer.

Hawaii’s 13 largest publicly traded companies rewarded their CEOs last year by increasing their total compensation an average 13.8 percent to $2.2 million, according to a Hono­lulu Star-Advertiser analysis of Securities and Exchange Commission filings. Six officers, including the non-CEO, received a pay package of at least $3 million.

The double-digit pay gain widened the gap even further between CEOs and the average worker in Hawaii. CEOs made 50 times more than the $44,000 that an average worker in the state earned in 2016. In 2015, Hawaii CEOs’ total compensation increased 18.3 percent to an average of $2 million — 47 times more than the then-$42,200 of an average worker in the state.

“No red flags are raised in my mind when I hear those numbers,” said Matthew Goforth, research manager at Equilar Inc., a Redwood City, Calif.-based board and executive data provider. “At the end of the day, really what counts to investors is analyzing the levels of CEO pay at a given company relative to their peers. And second, what kind of performance measures are being linked to the various incentive pay to those respective CEOs?”

Equilar looked at 100 of the largest U.S. companies by revenue and found that the median CEO pay rose 6 percent from fiscal 2015 to fiscal 2016, Goforth said. The median pay for these executives was $15 million and the average totaled $16.6 million.

Willis Towers Watson, a large conglomerate with an executive compensation consulting unit, looked at 365 of 1,500 Standard & Poor’s companies with the same year-over-year CEOs and also found a 6 percent median increase as well.

“Their sample size was about 3-1/2 times ours, and our studies found approximately the same growth value was 6 percent year over year,” Goforth said.

The Star-Advertiser survey calculated the CEO pay based on average rather than median because of the disparity in the state between large and small companies.

For the third year in a row, Bank of Hawaii’s Peter Ho, 51, topped the state’s CEO rankings with total compensation of $5 million, down 3.2 percent from the $5.2 million he received in 2015.

First Hawaiian Bank, whose parent company had its initial public offering in August, crashed the $3 million club with two members. Chairman and CEO Bob Harrison, 56, had his total compensation rocket 82.3 percent to $4.3 million — from $2.4 million — thanks to $1.6 million he received in stock awards. And First Hawaiian President and Chief Operating Officer Eric Yeaman, 49, who left his CEO post at Hawaiian Telcom to join the bank in June 2015, received $3.1 million, the highest compensation of any No. 2 executive at the state’s publicly traded companies.

Matson President and CEO Matt Cox, 55, remained above $4 million even though his pay package slipped 7 percent to $4.1 million from $4.4 million.

Hawaiian Airlines President and CEO Mark Dunkerley, 53, saw his total compensation jump 13.9 percent to $3.7 million from $3.3 million, and Hawaiian Electric Industries President and CEO Connie Lau, 65, had her total compensation rise 12.7 percent to $3.1 million from $2.7 million.

Altogether, seven of the 13 CEOs received higher compensation than the previous year.

The SEC requires companies to list the compensation of their CEO, chief financial officer and the other three most highly compensated employees serving as executive officers.

Among the perks some of the Hawaii CEOs received last year were club membership dues, car and parking allowances, in-office meals, reimbursement for out-of-pocket medical expenses, reimbursement of taxes related to flight benefits, spousal travel expenses and home security.

Equilar’s 100 companies included eight CEOs with pay packages over $30 million in fiscal 2016 compared with just four a year earlier. The highest-paid CEO was Charter Communications’ Thomas Rutledge, who received $98 million in total compensation that was boosted by a $78 million options grant.

While some CEOs receive astronomical pay packages, the broader Willis Towers Watson study found that relatively flat bonuses and uneven corporate performance contributed to the overall modest increase in the executive compensation it analyzed.

“The modest increase in CEO pay should come as no surprise in view of the relatively lackluster financial performance of companies in many sectors of the economy in 2016,” said R.J. Bannister, leader of Willis Towers Watson’s executive compensation consulting practice in North America.

More than half of the Hawaii CEOs had stock awards and stock options with values that exceeded their salaries, the Star-Advertiser found. Cox, Ho, Dunkerley and Harrison all had stock awards in excess of $1.6 million. Not all CEOs received stock awards.

“That’s very common for the average pay mixture of an S&P 500 CEO to be 60 percent in equity-­based pay and 40 percent in cash-based pay so it’s not unusual for half or the majority of CEO pay to be in the form of company equity rather than cash,” Goforth said.

Stock awards, which are tied to performance benchmarks such as a company’s return on equity and are paid over a multiyear period, were the single largest category of compensation in 2016. Stock awards averaged $904,773 for the Hawaii CEOs, with Cox’s $2.8 million leading the way and Ho and Dunkerley both slightly over $2 million.

Salaries were the second-highest source of compensation, averaging $559,887 in 2016. Harrison was the only CEO to exceed seven digits at $1.1 million. He also received a bonus of $893,000. Lau had the second-highest salary at $864,700. Allan Kitagawa, 71, chairman, president and CEO of Territorial Savings Bank, was third at $851,124, which is the same amount it has been since 2013. If Yeaman, of First Hawaiian, had been a CEO, his salary of $743,125 would have ranked fifth behind Harrison, Kitagawa, Lau and Ho ($780,000). Yeaman’s bonus of $979,682 was the highest of any executive, even topping that of Harrison, the First Hawaiian CEO.

The third-largest component of executive pay last year was “nonequity incentives,” an annual cash payment tied to meeting certain corporate goals. The average nonequity payment was $491,373, topped by the nearly $2 million received by Ho. Lau was second at $1.2 million and Dunkerley third at $957,181.

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