May 14, 2010
Women chief executives are finally getting the big paycheque
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Chief executives' pay is shattering the glass ceiling.

Boosted by a US$47.2-million package for Carol Bartz of Yahoo! Inc. and US$26.3-million for Irene Rosenfeld of Kraft Foods Inc., compensation for woman CEOs at the biggest U.S. companies is booming. Sixteen women heading companies in the Standard & Poor's 500 index averaged earnings of US$14.2-million in their latest fiscal years, 43% more than the male average, according to data compiled by Bloomberg News from proxy filings. The women who were also CEOs in 2008 got a 19% raise in 2009 -- while the men took a 5% cut. "When you see numbers like this, one can truly say that the glass ceiling in corporate America has been shattered," said Frank Glassner, CEO of Veritas Executive Compensation Consultants LLC. "I don't remember seeing women ever getting paid more than men." Graef Crystal, a pay expert who analyzed the data for Bloomberg News, said that "compensation committees are saying we don't want to have any trouble" over underpaying women, "so if we err, let's err on the side of giving them too much." Darwinian competition is also playing a role, said Sheila Wellington, a professor of management and organizations at New York University who studies women business leaders.

"These are the strongest, fittest and toughest who survive," according to Prof. Wellington, who said she was offered half the salary of male peers for her first job at a mental health facility in 1968. 'They've had to negotiate all the way up the ladder." Compensation consultant Todd Gershkowitz, senior vice-president of Los Angeles-based Farient Advisors, said he couldn't recall a female CEO ever receiving as much as Ms. Bartz, 61. Her package was bolstered when she joined in January 2009 by a five-million-share-options grant from Yahoo, valued at US$27.2-million, and a US$7.5-million share grant. "Welcome aboard" packages are standard fare for new CEOs. Yahoo went overboard when it added US$7.4-million in additional stock and options to Ms. Bartz's pay just 25 days after the initial award, Mr. Crystal said.

In the broader workforce, women working at least 35 hours a week in the first quarter of 2010 received 79% of the wages earned by men, according to the U.S. Labor Department. Female heads of companies of all sizes made about 75% of what men did in a 2009 department survey of 1.1 million CEOs. About 24% were women. Pay riches for women CEOs at big companies may be "an important indicator, but not a milestone because of what happens down the line" among average workers, said Robin Ferracone, founder of Farient. "Even at the CEO level, with equal pay comes equal scrutiny and a narrower band of acceptable behaviour," said Ms. Ferracone.

At Kraft, Ms. Rosenfeld received a 41% raise last year as the shares fell behind the S&P 500's performance by 21 percentage points. In a Crystal model that adjusted pay for shareholder return, she would have taken an US$18-million pay cut, and was rated as the 16th most overpaid CEO among 271 studied. Crystal looked at S&P 500 companies that had filed 2009 fiscal year proxies by April 16. Ms. Rosenfeld, 57, was awarded US$10.6-million in a performance-based bonus, which Kraft's proxy attributed in part to her at times criticized pursuit and acquisition of Cadbury PLC, which made Kraft into the world's largest confectioner.

Michael Mitchell, a spokesman for Northfield, Ill.-based Kraft, said company officials "strongly believe" the Cadbury acquisition was "absolutely the right decision" and will boost earnings. The pay package for Ms. Rosenfeld, who led Kraft to "strong operating results in 2009" in an "extremely volatile and challenging operating environment," was driven by a payout from a 2007-09 long-term incentive plan, he said. Other female CEOs in the S&P 500 considered overpaid in 2009 in the Crystal model were Susan Ivey of Reynolds American Inc., Mary Agnes Wilderotter of Frontier Communications Corp. and Indra Nooyi of PepsiCo Inc. Shareholders at Reynolds last week defeated a resolution that would have required an extended holding requirement for stock awards. Ms. Ivey received US$6.24-million in stock last year. A similar resolution is pending at Frontier, where Ms. Wilderotter got US$3-million in stock. "We're concerned their high levels of stock compensation and lack of holding requirements could mean pay isn't sufficiently tied to performance," said Brandon Rees, deputy director of the office of investment for the AFL-CIO, a supporter of the resolutions.

Debra Cafaro, CEO of real estate investment trust Ventas Inc. for the past decade, received US$6.25-million last year, and was rated as underpaid in the Crystal model. She took an 18% pay cut in 2009. Ventas has been the best-performing stock in the S&P 500 financial sector under her tenure, with a 35% compound annual return for shareholders. "Once you're in the CEO seat, I believe directors use a very even-handed approach to compensation," Ms. Cafaro said. "But getting there can be a different story and women executives may be judged more critically." Ventas returned 12 percentage points above the S&P 500 last year for shareholders. Ms. Cafaro's base salary and non-equity incentive compensation were increased by 3.5% and 33%, respectively, while her equity awards decreased 34%. "The compensation committee believes the CEO should have the greatest alignment with our shareholders, and, therefore, her compensation structure was designed to reflect a higher sensitivity to our performance than the compensation structure of other named executive officers," a company filing said.

Women CEOs are almost twice as likely to have been named to the job from outside, as Ms. Cafaro was, than from within, according to a Harvard Business Review study by Herminia Ibarra, a professor of organizational behaviour, and Morten Hansen, a professor of entrepreneurship. There is a strong market for "outside-the-mould" candidates today and not a huge supply, so there's no surprise it's reflected in their salaries, Prof. Ibarra said. Being brought in means they'll be paid a premium, Ms. Ferracone said, noting firms are emphasizing diversity and having a woman at the helm fulfills that agenda. And that, said Ms. Ferracone, can lead to an advantage when negotiating pay. | Return To Media |