Good news: I’m finding it harder and harder to write this column. My charge each quarter is to give a Texas CEO who has been piggish about his compensation the comeuppance he deserves. For a while things went swimmingly, because some Texans did indeed deserve comeuppance. But the problem is that there aren’t that many—particularly in high tech.
Several months ago I once again looked through my databases to find a paragon of greed. In my study of CEO pay at 854 major companies in 1998—the most recent year for which we have data—I found eleven Texas companies in the high-tech sector. Heading the list, paywise, was Michael Dell of Dell Computer. While he’s overpaid, as I’ve noted in these pages and elsewhere, he’s far from an unequivocal pay hog; he gets far too many stock options, but his long-term performance has been nothing short of spectacular, so his shareholders couldn’t care less.
That brings me to the number two CEO in terms of pay, C. Vin Prothro of Dallas Semiconductor. My mathematical pay models show him to be overpaid by 46 percent. But that’s nothing; fully one third of the corporate chiefs in my study were even more overpaid.
Perhaps the best example of this phenomenon—the relative non-piggishness of Texas high tech—is Thomas Engibous, the CEO of Texas Instruments. Here are a few stats on him:
• His base salary was nearly $678,000 in 1998. But a CEO running a high-tech company of the same size and turning in the same performance would have been paid, on average, $804,000. So he was 16 percent below the market.
• His base salary plus his annual bonus was nearly $2.5 million. This was above the market pay average, but by a piddling 9 percent. Not even I could get outraged at that.
• His total pay—his base salary, his annual bonus, his benefits, and the estimated present value of the stock options he was granted in 1998—was an impressive $6.4 million. But a similarly situated CEO would have earned $10.7 million. So Engibous was 41 percent below the market, a competitive underage that put him in the bottom fourth of all CEOs.
Of course, another way to look at the issue of high-tech chiefs and their compensation is to note that Texas CEOs pretty much missed a bet. My analysis found that the average base salary of the eleven CEOs of high-tech companies was 23 percent above the market and that the combination of base salary and bonus was 9 percent below the market. But in total pay, the competitive deficit was 61 percent. That meant that, as a group, Texas CEOs seemed to be playing it more safely than their Silicon Valley counterparts—placing more emphasis on secure base pay but much less emphasis on stock options, Dell excluded. Yet the stock option area is where the real action has been over the past few years, as high-tech company after high-tech company watched its share price soar to record levels. Perhaps the Texas crowd changed its pay emphasis in 1999—we won’t have that data for a few months—but I’d be surprised if the pay levels in Texas didn’t once again turn out to be low.
Not that any of this should come as a big surprise. Texas is, after all, cattle country, not pig country.