Comparing CEO compensation across public companies in the midstate is never going to be fair, and results will always vary.
Industry is diverse, past performance and current financial position of a company drive bonus structures differently, and, let's face it, the names above the title are constantly changing.
Of the top 10 companies on the Business Journal's 2013 public companies list, ranked by revenue, eight have changed CEOs at least once over the last five fiscal years. Wormleysburg-based Harsco Corp., which finished last year with $2.9 billion in revenue, has had multiple changes at the top.
Moving down the list, there has been more stability, especially among the financial holding companies that run regional banks.
We tracked total compensation for 23 of the 26 companies on that list to see how CEO pay has trended. In general, hitting annual sales targets and stock performance are largely driving compensation totals that companies report on annual proxy statements to shareholders.
Share price at the end of a company's fiscal year matters when it comes to stock awards and options.
Our five-year snapshot revealed that John Bilbrey, CEO of Derry Township-based The Hershey Co., made the most in the last fiscal year at $13.83 million.
As of April 1, the return on investment for Hershey shareholders was 222 percent from the end of 2009, according to Yahoo Finance. That is based on an adjusted closing stock price of $104.11 per share compared with $32.34 on Dec. 31, 2009.
Hershey is the second-largest locally based public company, with $7.15 billion in revenue last year.
Jeffrey Hines, CEO of The York Water Co., made the least last year in dollars, at $227,647.
For the 20 companies where the same CEO was in place for the last two fiscal proxies, the largest percentage jump was Jay Shah, CEO of Harrisburg-based Hersha Hospitality Trust. Shah's compensation jumped 128 percent between fiscal years 2011 and 2012. He made $6.56 million in 2012.
Alan Shortall, CEO of Conewago Township-based Unilife Corp., saw the biggest percentage drop at 88.7 percent between fiscal years 2012 and 2013. He made $690,210 last year.
Proxy statements for fiscal year 2013 — and FY 2014 in the case of East Pennsboro Township-based Rite Aid Corp. — had not gone out for six of the 23 companies, as of Tuesday. We pulled fiscal year-end and more-recent stock prices to help highlight company performance in a bull market, which likely meant sizable increases for those CEOs.
First-quarter CEO turnover highest since 2008
CEO turnover in March increased 9.8 percent from February, as 123 U.S. CEOs left their posts during the month.
After three months, 366 have departed this year, the most in a single quarter since 408 CEOs left their posts in the third quarter of 2008, according to a recent report from global outplacement consultancy Challenger, Gray & Christmas, Inc.
Of those, more than 100 retired.
The quarterly total was 18.4 percent higher than the same period a year ago, and 23.4 percent higher than the previous quarter, according to the report.
Health care was the leading sector, with 86 CEO changes in the first quarter. Government and nonprofit entities were No. 2, with 50, followed by computer firms.
In Pennsylvania, there were 16 departures through March, according to the report.
The average tenure of a departing CEO has been about 12 years so far this year. Last year, it was just shy of eight years, according to the report.
CEOs matter more today
A recent study in the Strategic Management Journal found that the "CEO effect," or portion of company performance associated with who's in charge, has grown significantly since the mid-20th century.
From 1950 to 1969, just knowing the industry a company was in predicted 38.7 percent of differences in performance, according to the study, which was summarized by Harvard Business Review.
From 1990 to 2009, industry predicted only 3.7 percent of the difference.
"A combination of forces — including the shift of emphasis toward maximizing shareholder value and the role of technology in increasing the pace and complexity of business in countless sectors — made business more dynamic and less predictable," according to the HBR report. "It's against that backdrop that CEOs have been empowered to pursue new strategies and markets, often across the globe."
In other words, CEOs matter more than ever.
Leading through change
Health care organizations vary widely, with a mix of nonprofits and for-profits, big health systems and small hospitals, national companies and local independents — and Central Pennsylvania has representatives of all those classes.
Health care is also, famously, an industry in the midst of a massive transition, and nationally that is perhaps most evident among its leaders.
According to global outplacement consultancy Challenger, Gray & Christmas Inc., health care has been the clear leader in CEO turnover recently, with 265 in 2013 — more than any other industry. The 78 in the third quarter of that year was the highest on record for health care, but the first quarter of 2014 handily eclipsed that mark with 86.
With the exception of the acquisition of Health Management Associates Inc. by Community Health Systems Inc., the midstate so far has not seen much tumult at the top. However, the leaders universally have been busy remolding their organizations, whether by hiring physicians, acquiring other providers or forming affiliations.
These numbers show total compensation for the CEOs. Salary typically represents a sizeable chunk of that total, but, particularly for the larger organizations, bonuses, deferred compensation and other, nontaxable benefits frequently constitute about half the sum.