Dallas-Fort Worth’s Top 100 Ceos Saw Their Pay Rise About 1 Percent in Annual Ranking

Marquee names remained atop the CEO payday leaderboard for 2016, and Dallas’ diverse economy helped shield the region from the impact of flagging energy sector fortunes.

Those were two of the most striking trends to emerge from a detailed study of compensation awarded to chief executives at North Texas’ largest publicly traded companies, based on 2016 revenue.

AT&T CEO Randall Stephenson

The study, done by Houston-based Longnecker & Associates, crowned AT&T’s Randall Stephenson as the best-compensated CEO in 2016, with total direct compensation of $28.434 million.

That’s up 13 percent from 2015, which looks like a bargain compared with the telecommunications giant’s 30 percent gain in total returns to shareholders in 2016.

Stephenson edged ahead of energy exec-turned-diplomat Rex Tillerson, who had the heftiest pay package in 2015. His 2016 compensation of $27.394 million was virtually unchanged from 2015, when Tillerson, now secretary of state, was chairman and chief executive of Irving-based Exxon Mobil Corp.

In 2016, Exxon Mobil’s then-president, Darren Woods, earned total compensation of $16.85 million. Effective Jan. 1, when he stepped in as chairman and chief executive, he got a pay hike. His annual salary was increased by $200,000 to $1.2 million.

Among the 100 companies with the highest-paid CEOs, heads of energy-related companies enjoyed the fattest pay envelopes. The total awarded to all 17 CEOs in the energy group, however, gained only 1 percent compared with 2015.

The highest leap came in the financial services sector, which went from 19 companies in the top 100 group in 2015 to 23 in 2016. That sector saw the combined CEO compensation balloon by 37 percent, the largest gain for any sector.

Experts say that signals the growing importance of the financial services sector locally, even as energy continues to lose steam.

Chris Crawford, president of Longnecker & Associates

“I think it’s good and healthy that you’ve got a really good, strong, diversified market in Dallas,” said Chris Crawford, president of Longnecker, an executive compensation and governance consulting firm. “If you go back [in time], maybe energy was a little more dominant. Over the years, Dallas has done a really good job of … bringing in and being attractive to lots of good strong companies who have moved in or started up or grown.

“I think financial services is going to be a major part of the market going forward,” he added. “They’re a stable segment generally speaking. Energy is very up and down.

“So this continued shift of diversifying I think is overall … really healthy … for the Dallas market, for employment, for the Dallas economy, for housing. It’s all got a bit of a trickle-down effect to it.”

IndustrySum totalOne-year changeEnergy$127,241,7091%Financial services$98,141,14337%Consumer discretionary$84,146,328-11%Information technology$77,641,297-15%Consumer staples$53,105,29513%Industrials$49,199,9297%Materials$35,793,05821%Health care$32,436,670-30%Transportation$17,322,4230%Real estate$4,792,064-1%

As a group, the top 100 CEOs barely saw their pay grow in 2016. Total compensation rose about 1 percent on average, Crawford said.

The view from the middle looked a lot better. The median pay gained 7.9 percent in North Texas.

Hefty one-time packages for two execs kept the compensation average in positive territory.

Gregg Tanner, former chief executive of Dean Foods, “was removed from his position as the company’s CEO” at the end of 2016, according to a filing with the Securities and Exchange Commission. He received $15.53 million as severance on his way out the door, which pushed his 2016 compensation package up 135 percent compared with 2015.

T. M. “Roe” Patterson led his company, Fort Worth-based Basic Energy Services, through a pre-packaged Chapter 11 bankruptcy case in 2016 that turned more than $800 million of unsecured debt into equity.

Patterson, whose company provides on-site services to oil and gas wells, received stock options and other incentives as part of the bankruptcy case.

Taking out those two executives, who saw some of the largest gains in the group, total compensation for the other 98 CEOs as a group actually dropped about 4 percent, Crawford said,

Individually, only about 70 of the 100 saw their compensation increase, and in most cases, shareholders got their money’s worth. In about a dozen cases, CEO compensation went up while total shareholder returns declined.

That includes Floyd F. Sherman of Dallas-based Builders FirstSource Inc., whose compensation gained 188 percent to $4.83 million while shareholder return slipped by 1 percent.

Pay follows performance

The 7.9 percent median gain in North Texas tracks CEO pay patterns seen at the nation’s largest companies, based on a broader study by Equilar. That report showed a 6 percent gain in median compensation for the heads of the top 500 companies based on 2016 revenue.

This was the biggest gain since 2013 and took median CEO compensation to $11 million, according to Equilar. The best-paid CEO in the Equilar annual study was Tom Rutledge at Charter Communications, with a 2016 package of $98 million.

Dan Marcec, director of content at Equilar and editor-in-chief of its annual CEO Pay Trends report, noted that compensation analyses can vary greatly based on the mix of companies studied.

That said, he noted that CEO compensation is increasingly tied to stock performance. If stocks in a particular sector are doing well, pay generally follows suit.

Crawford of Longnecker thinks the D-FW CEO performance is heavily influenced by the outsize presence of the energy industry.

Of the 20 CEOs with the largest compensation packages, six are in the energy space, the most for any one group.

“Energy companies have had a difficult time the past several years,” Crawford said. “Commodity prices are still fairly low. Bonuses were down, long-term incentive awards were down. Salaries [showed] a pretty negligible increase. I think it was pretty heavily influenced by the commodity price.”

The impact of the energy sector shows up more readily when comparing Dallas’ pay packages to those in energy-dependent Houston.

In North Texas, long-term incentives, which includes stock awards, fell on average by 1.3 percent in 2016, according to the Longnecker study. In Houston, that category fell 17 percent.

And while North Texas’ 1.1 percent average gain in total compensation trails the Consumer Price Index, it still beats Houston’s average decline of 11.2 percent.

If you strip out all the energy companies in the North Texas sample, “I think you would see a change in compensation that was more similar to the Fortune 500,” Crawford said.

Diverse sectors

Even with energy’s power, Crawford noted that North Texas has an economy that’s not beholden to any one sector.

Roughly 80 percent of the top CEOs work in five categories: energy, financial services, consumer discretionary spending (such as retailer J.C. Penney), information technology and industrials (such as HVAC maker Lennox International).

Looking to the second half of 2017, Crawford predicts a continued drag due to energy, but he also sees promise in the region’s growing sectors.

“This is evidence of the further strengthening of the Dallas-Fort Worth market,” he said.

About this report

The Dallas Morning News works with Houston-based Longnecker & Associates to create the annual report on CEO pay. The figures are taken from the summary tables in each publicly traded company’s filings with the Securities and Exchange Commission.

This annual ranking examines compensation across a number of measures.

Annual incentive includes bonuses and non-equity incentives. Total cash compensation includes the base salary and annual incentives. Long-term incentives include stock awards and stock options. Total direct compensation includes those categories and any change in pension value/ retirement benefits and all other compensation.

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