COMPARED with the pay of celebrity chief executives such as Oracle Corp.'s Larry Ellison, the $7.3 million in total compensation pulled down last year by Synnex Corp. CEO Robert Huang is practically paltry.
But set against the tech-product distributor's fiscal 2006 profit of $51.8 million, Huang's pay looks a lot bigger. In fact, his compensation amounted to 14% of the company's earnings, the highest pay relative to earnings at California's 100 largest public companies.
Anger among investors has intensified in recent years as executive pay has escalated. One reason for the growing fury, according to corporate governance advocates: Compensation increasingly is taking a noticeable slice out of corporate profits.
Last year, among the state's top 100 companies, the typical CEO's pay amounted to 2% of net income, The Times found in its annual report on executive compensation in California.
Put another way, the share price of that typical company would theoretically be 2% higher if it didn't have the CEO's pay eating up earnings, based on the notion that a firm's stock price amounts to a multiple of its earnings. And how many investors would ignore a 2% change in the value of their stock portfolios?
At 14 companies, including Synnex, the chief's pay amounted to 5% or more of net income.
Critics say no one deserves such a big piece of the pie.
"It does raise the question about whether shareholders are getting adequate bang for their buck," said Patrick McGurn, executive vice president of Institutional Shareholder Services, which advises shareholders and campaigns for good corporate governance. "These numbers are often material, at least to near-term earnings."
This year, for the first time, our compensation listings include a column showing the CEO's pay as a percentage of earnings, plus a column showing the theoretical hit to the company's stock price (calculated by multiplying the percentage of profit by the stock price on May 31). For example, at Synnex, Huang's pay theoretically reduces the value of each share by $2.90. (The stock finished last month at $20.48 a share.)
To be sure, these yardsticks have flaws.
For one thing, at 15 companies, the two figures couldn't be calculated because the company lost money or earned less than the person in charge.
In addition, these calculations ignore extraordinary items. So if a company takes a big charge against earnings, such as a write-off for restructuring costs, the CEO will appear to be comparatively higher paid than he or she would have otherwise.
