Most of the chief executives at Hawaii’s top publicly traded companies took pay cuts last year, with the average compensation package falling to just under $2 million.
Hawaiian Electric Industries CEO Constance Lau topped the list for the third consecutive year with salary, stock awards and other compensation totaling $3.77 million in 2013. Lau, whose pay dropped from $5.82 million in 2012, was one of eight CEOs who took home less last year. Three others saw an increase.
The average compensation for the 11 CEOs slipped to $1.90 million in 2013, a 7 percent decline from $2.05 million in 2012, according to a Star-Advertiser analysis of Securities and Exchange Commission filings.
The amount paid to Hawaii’s executives paled in comparison with what the nation’s leading CEOs received. The median pay for the top 100 chief executives in 2013 was $13.9 million, an increase of 9 percent over the previous year, according to a report prepared for The New York Times by Equilar, a company that provides information about executive compensation. Billionaire software mogul Larry Ellison, who bought 98 percent of Lanai in 2012, remained at the top of the list with compensation valued at $78.4 million.
Hawaii’s top executives also were on the low end in a measure that compares CEO pay to that of an average worker in the state. The average pay for a Hawaii CEO was 60 times higher than that of an average worker in the state last year, according to a recent study published by the AFL-CIO. There were only six states with lower ratios: North Dakota, South Dakota, Montana, Mississippi, West Virginia and Maine. The gap was the widest in Michigan, where the average CEO pay was 171 times that of the average worker.
Lau, who runs Hawaii’s largest company in terms of market capitalization, was one of three CEOs whose compensation packages totaled more than $3 million. Bank of Hawaii’s Peter Ho was second on the list for the second consecutive year, reporting $3.61 million in compensation. Matson CEO Matthew Cox, who completed his first year at the helm of a stand-alone publicly traded company, had the third-highest compensation at $3.57 million.
The SEC requires public companies to report total compensation for their top five executives, including the current value of performance-based stock awards that CEOs usually don’t receive until a later date. Companies also must report changes in the projected value of pension benefits, which can swing widely from year to year based on interest rate assumptions.
Declines in pension values played a large role in the comparison between 2013 and 2012 pay packages. Compensation was inflated in 2012 by an average of $232,000 per CEO due to changes in pension value. In contrast, the 2013 change in pension value was negative for all 11 CEOs, but SEC rules don’t allow for inclusion of negative pension amounts in proxy summary compensation tables.
As has been the case in recent years, more than half of the Hawaii CEOs had stock awards and stock options with values that exceeded their salaries. Lau, Ho, Cox and Hawaiian Holdings CEO Mark Dunkerley all had stock awards in excess of $1 million.
Stock awards, which are tied to performance benchmarks such as a company’s return on equity and paid over a multiyear period, were the single-largest category of compensation in 2013. Stock awards averaged $841,140 for the 11 CEOs.
Salaries were the second-highest source of compensation, averaging $545,060 in 2013. HEI’s Lau led the field with a salary of $815,000, which was unchanged from 2012.
Alexander & Baldwin CEO Stanley Kuri yama saw his salary decline in 2013 for the second consecutive year. A company spokes woman said Kuri yama requested the reduction in salary to reflect the smaller size of the company after the completion of its split from Matson in June 2012. Kuri yama also sought to keep the ratio between his salary and other top company executives lower than typical among public companies, she said.
The third-largest component of executive pay last year was "non-equity incentives," which are annual cash payments contingent on meeting certain corporate goals. The average non-equity payment was $397,681, topped by the $989,643 received by Lau.
The compensation data do not take into account the size of the firms or the complexity of the business they conduct.
Barnwell Industries Inc., the state’s smallest listed company, paid its CEO the most in relation to the firm’s market capitalization. CEO Morton Kinzler received $805,580 last year — an amount equal to 3.1 percent of the company’s market cap of $26 million. Barnwell’s main business is oil and gas exploration and development in Canada. The company also invests in Hawaii real estate.
Kinzler was compensated at a rate significantly higher than the rest of the CEOs, who received on average an amount equal to 0.25 percent of market cap.
The largesse bestowed by Barnwell’s board of directors on Kinzler and the company’s other top executives is inappropriate given the lackluster performance of the company’s stock over the past two decades, said Ned Sherwood, a Florida-based investor who owns 10 percent of Barnwell’s outstanding shares.
Kinzler, who is listed as 88 years old on the company’s proxy report filed Jan. 16, does not appear to be actively involved with running Barnwell anymore, Sherwood said. He said Kinzler splits his time between his home in Florida and New York, where he stays in a company-owned apartment in Manhattan.
"I’ve asked the board about his compensation," Sherwood said. "How can he make close to a million dollars without going anywhere near his businesses in Canada and Hawaii?" Sherwood asked.
Sherwood said he has unsuccessfully tried to force Kinzler’s retirement and restructure the company.
At the other end of the spectrum is Hawaiian Electric Industries, the state’s largest company with a $2.55 billion market cap. Lau’s compensation last year was equal to 0.15 percent of HEI’s market cap, the lowest ratio of all 11 companies surveyed. Alexander & Baldwin and Bank of Hawaii were just above HEI with CEO pay at 0.17 percent of market cap.
