With a single SEC filing last week, Oracle CEO Larry Ellison became the most well-paid business leader in America. His $84.6 million in total compensation, together with the $544 million worth of stock he cashed in, totals more than the gross domestic product of Grenada (and Ellison didn’t need to export a single ounce of nutmeg).
$84.6 million seems like an outrageous sum of money—hell, it is an outrageous sum of money—but Oracle’s shareholders are still getting off cheap. This year, the company’s net income from continuing operations (which is pretty much a fancy way of saying “profit”) spiked nearly 30 percent to $5.5 billion. Ellison’s share of that single-year haul is only 1.5 percent. I pump a larger percentage of my income into my gas tank.
After the jump, let’s see if the shareholders in our state’s five most profitable companies are getting as good a deal from their chief executives.
Raytheon Co.: $1.69 billion
The Waltham-based defense contractor had another great year in 2007, ranking as the state’s most profitable company. Most of that success comes from things like sales of air-to-air missles and combat systems for Navy destroyers. The work of CEO William Swanson earned him $19.3 million, or about 1.1 percent of total profits.
Verdict: Good bang for the buck here. I don’t even begrudge Swanson the $215,000 Raytheon spent on his private jet flights and other perks.
EMC Corp.: $1.66 billion
Even though he took over the Hopkinton data-storage giant just as the tech bubble was bursting, Joseph Tucci has deftly steered the ship back into the black. For his trouble, he earned $17.3 million in 2007, or 1 percent of profits. And Tucci actually took a $3 million cut in his total compensation last year (he made up for it with $10.7 million worth of stock).
Verdict: Tucci’s pay translates into a steal for investors. EMC’s stock price has been posting double-digit percent increases for years now, and 2008 is not looking any different.
State Street Corp.: $1.26 billion
Like most of its competitors, State Street has been hit by the sub-prime mortgage meltdown, going as far as to establish a $600-million legal defense fund to deal with angry investors. Still, CEO Ronald Logue raked in $28.3 million in total compensation last year ($1.5 million more than the previous year). That’s 2.2 percent of the Boston-based investment company’s profits.
Verdict: In hindsight, Logue’s compensation, highest of the top five Massachusetts companies, looks too generous, especially in a rocky 2007. Yet the slowdown was only temporary; State Street is bouncing back in fine form this year.
Boston Properties: $1.09 billion
Boston Properties owns offices like the Pru and New York’s GM Building, for which it paid $2.8 billion in June (the highest price ever paid for a single building). Longtime CEO Edward Linde made a relatively modest $4.8 million in 2007—that’s less than half a percent. In other words, for every $1,000 in profits, Linde essentially made a mere $4. Try getting your money manager to agree to that kind of fee.
Verdict: Less than half a percent? Best deal in town, even as stock prices fell a bit this summer amid a reshuffling of the real estate portfolio. I doubt Linde feels undercompensated, though: He cashed in $30 million worth of stock in the company he co-founded.
Staples: $995 million
Recent performance at Framingham-based Staples has been slower than expected, but CEO Ronald Sargent certainly earned his paycheck this year. He just finished negotiating a prickly, blockbuster deal for Amsterdam-based office supplier Corporate Express. His compensation leading up to the purchase was $11.4 million for 2007—roughly 1.1 percent of that year’s profit.
Verdict: The fact that Staples can now lay claim to the mantle of world’s largest office-supply company makes last year’s $11.4 million payout look like a wise investment in this year’s big buy. Logue surely has a nice bonus coming his way this year.