Walt Disney Co.'s corporate offices in Burbank may have eclipsed Disneyland as the "happiest place on earth."
Every year, Disney's top executives collect their riches. Last year, they were the four highest-paid executives at California's publicly held corporations.
Disney President Frank G. Wells became the state's best-paid by exercising stock options and pocketing $46.1 million. Added to his $4.8-million salary and bonus, his total compensation was nearly $51 million.
Gary Wilson, Disney's former chief financial officer, came in second with a pay package worth $49.5 million. Michael Eisner, chief executive, was third with $9.6 million. Richard Nunis, who heads a subsidiary, was a close fourth with $9 million.
High pay is fast becoming a tradition at Disney, where Eisner topped the 1988 compensation sweepstakes with $40.1 million and Wells followed with $32.1 million.
Although Disney may be in a class by itself--largely because pay is closely linked to the company's sterling performance--soaring executive pay has become commonplace in California.
For the 100 highest-paid executives at the state's publicly held companies, total compensation last year averaged $3.56 million, versus $2.43 million in 1988. Both figures include salary, bonuses, stock gains and perks.
That 46.5% pay hike means the average California executive earns $1,711 an hour based on a 40-hour workweek, compared to about $1,150 a year ago. The workweek is frequently longer for top executives, but the hourly rate remains high no matter how it's figured.
The average California worker got a 5% pay hike last year, according to a survey by Towers, Perrin, Forster & Crosby.
Five years ago, seven-digit pay packages were relatively rare. Now, any chief executive of a large corporation seems to get one.
A Times survey found that 167 executives of California's publicly held corporations made at least $1 million last year. Fifty of those got $2 million or more. The $1-million level was reached by only 91 California executives in 1988, and only 80 in 1987.
"The $1-million level seems to be becoming a psychological data point for CEOs," said Fred Whittlesey, senior manager at KPMG Peat Marwick's Los Angeles compensation-consulting group. "And there's no question that the numbers will continue to grow at a rate that is in excess of the average employee's pay."
Getting shares of stock--through options or outright gifts--continues to be one of the biggest elements in total pay. Thirteen of the 25 highest-paid executives wouldn't have made the top 100 without stock options and grants.
Data for the most recent Times survey of executive compensation was compiled from the proxy statements of about 500 publicly held companies with revenues of more than $20 million. The pay of more than 2,300 top officers was examined. Information on the compensation of executives at private companies is generally not made public.
What keeps pushing the salaries of high-paid executives higher? A corporate case of keeping up with the Joneses.
The system provides "automatic escalators" for higher-ups. Salaries for average workers are generally determined by budgets and, to a lesser extent, by competitive pressures for certain job classifications. But competitive pressures weigh far more heavily when determining increases for top officers.
Executives and directors hire consultants to survey competitors and determine what average pay levels are at companies of similar size in their industry. But who wants to award salaries to the top dogs that are just average? Instead, many companies choose to provide compensation that falls in the 75th percentile--meaning pay is higher than what is provided by 75% of comparable companies. If companies that compete in the industrial marketplace also compete on executive salaries, pay can spiral at an alarming rate.
Of course, not every executive makes megabucks. Million-dollar salaries are relatively rare at smaller companies. The average pay of the more than 2,300 California executives surveyed was $447,959. Even that figure overstates the pay of most executives because it is skewed by a handful of eight-digit earners. The median salary, which indicates half the salaries in the survey were higher and half lower, was $236,838.
Sometimes, pay doesn't correlate with size. At California's biggest company--Chevron, with $29.4 billion in revenue--the highest-paid officer is Vice Chairman J. D. Bonney, who earns $679,566. On the other hand, Los Angeles-based Maxxam's revenue is only $2.4 billion, but Charles E. Hurwitz took home a salary and bonus of almost $4 million.
Although there is a rising clamor about "excessive" executive salaries, compensation consultants say there is little criticism of some of those who top The Times' list of highest paid.
Despite the stunning pay levels at Disney, the company has emerged as a sort of role model of how to set up an executive compensation system.