While the Inland Northwest economy limped its way through 2002, the regions top-level executives generally saw the kind of pay raises thatll put a spring in your step.


Executives of publicly traded companies in Spokane and North Idaho, on average, saw their paychecks surge 17 percent in 2002, an annual analysis by the Journal of Business shows.


The analysis of the compensation of nearly 70 executives here found that their overall average pay, including perks, long-term incentive pay, and exercised stock options, soared to about $367,000 in their employers 2002 fiscal year. That compared with about $314,000 for the same set of executives in the previous year. Even counting just salary and bonuses, the average executives pay grew a considerable 14 percent, to about $295,000.


The information for the analysis came from the proxy statements of 15 publicly traded companies based in the Inland Northwest. Public companies are required to file such information annually with the U.S. Securities and Exchange Commission.


By way of comparison, the Wall Street Journal reported this spring that overall compensation among the CEOs of the nations largest companies jumped 15 percent. Note, however, that the Wall Street Journal/Mercer study uses medianor midpoint in a rangerather than average, in its calculations. Median overall pay in the Spokane study jumped nearly 19 percent.


Also noteworthy would be to compare the 17 percent overall pay increase of the Inland Northwest executives in the Journal of Business analysis with the 3.2 percent growth in U.S. wages and benefits of all workers last year.


Topping the Journals list of the 40 highest-paid public-company employees this year is Robert D. Neilson, president and chief operating officer of Itron Inc., who thanks to stock-option gains of about $944,000, had total compensation of $1.59 million in 2002. His compensation edged down just slightly from 2001, but he still rose to No. 1 on the list, from seventh last year, because this is the first year the Journal has included as compensation the gains executives make on stock options exercised during the year, as most other similar compensation analyses do.


Few executives in this years analysis exercised stock options in 2002, most likely because the depressed stock market has made many stock options worthless until share prices rise again. One who did, however, was Jack Gustavel, chairman, president, and CEO of Coeur dAlene-based Idaho Independent Bank, who posted a paper gain of $557,200 on stock options in 2002, putting him third on the list with overall compensation of about $1.1 million. As of the end of the fiscal year, Gustavel had not sold those options, the company said.


Ranked No. 2 on this years list was Arthur Brown, who retired as CEO of Hecla Mining Co. this spring and remains that Coeur dAlene-based companys chairman. Brown had total 2002 compensation of about $1.2 million, nearly double his 2001 overall pay.


Rounding out the top five were Phillips S. Baker Jr., who was president, COO, and CFO at Hecla during 2002 and now is president and CEO, with compensation of $901,000; and Sterling Financial Corp. Chairman and CEO Harold Gilkey, whose overall pay totaled about $893,000. Gilkeys pay jumped 93 percent, thanks partly to a $329,000 company contribution to a supplemental executive retirement plan.


Absent from the top 40 this year were the following CEOs: WestCoast Hospitality Co.s Donald Barbieri (who since has retired from that post), ranked 41st; Gold Reserve Corp.s Rockne Timm, 44th; Coldwater Creek Inc.s Dennis Pence, 45th; and Northwest Bancorp.s Randall Fewel, 56th.


Some saw pay decrease


Though most companies included in this years analysis gave their top-level executives healthy pay increases, not all did. At WestCoast Hospitality, overall compensation fell an average of nearly 17 percent for the top five executives listed in the companys annual proxy. Barbieri, who during 2002 was still the hotel and entertainment companys chairman, president, and CEO, saw his overall pay decline about 7 percent, to $227,000, making him one of the lowest-paid public-company CEOs here.


Other companies that reduced their top-level executives pay on average, included AmericanWest Bancorp. (down 0.5 percent), Itron (down 1 percent), Potlatch Corp. (down 4.7 percent), Key Tronic Corp. (down 6.9 percent), and Ambassadors Group Inc. (down 23 percent).


At the other end of the spectrum was Hecla. The top five executives of Hecla collectively saw their pay skyrocket 114 percent. Hecla had reason to celebrate. It turned a healthy net profit last year of $14.6 million, compared with a year-earlier loss of $5.7 million, and its share price shot up more than 400 percent to crest $5 a share at year-end.


With the exception of the travel industry, in which both WestCoast and Ambassadors do business, all the industry sectors represented in this analysis showed average increases in pay, though the technology sectors increase was quite modest, at 2.8 percent. Executives in the finance industry collectively saw their pay shoot up 22.7 percent amid record earnings and strong share-price increases last year. Those involved in natural resourcesmining and wood-products companieslisted pay increases of 29.3 percent, on average.


Avista Corp., of Spokane, is the only publicly traded utility here. Together, its top executives saw increases of nearly 32 percent last year as the energy company improved its financial health, posting an annual net profit of nearly triple the amount it cleared in 2001. Coldwater Creek, the areas only publicly traded concern in the retail world, provided its top executives with a 7.3 percent raise, on average.


The Sandpoint-based retailers Georgia Shonk-Simmons, one of only five female executives included in the compensation analysis, moved down from the CEOs post during the year to become chief merchandising officer. Her overall pay of $670,000 still kept her in the top 10, though, and was 29 percent higher than the year before. Co-founder Dennis Pence, Coldwaters chairman, took back the role of CEO, though his compensation declined another 6 percent last year. His wife, co-founder Ann Pence, who long has made the Journals Top 40 list, retired last year, and her pay wasnt included in the companys proxy statement for 2002.


Though the Pences have ratcheted down their own pay in the last few years, in some cases to provide holiday bonuses to Coldwater Creek employees, they are far from destitute. The Pences together continue to own nearly half of the companys outstanding common shares, which today are worth a total of more than $100 million.


Small sampling


The big increase in average overall pay was a bit of a surprise in todays economy, says Jeannine Marx, a Spokane executive headhunter and president of the Technet technology alliance here. After last years analysis, Marx and others had predicted that the numbers in this years analysis would show a decline, as the incentive pay of executives here began reflecting the difficult economy.


Because of Spokanes limited number of public companiesand the limited number of industries in which they do businesshowever, the success of some can push the overall numbers up more dramatically than they would in a larger regional or national survey, Marx says.


Thats because in many cases companies link bonuses and other incentive pay to the price performance of their common stock. The stock prices of the 15 Inland Northwest companies involved in this study climbed, on average, about 40 percent during their 2002 fiscal years.


There is a correlation between the 17 percent (pay) increase and the share prices, Marx says. We happen to have some public companies that are in industries where the stock is up.


Base pay (salary only) for the executives in this years analysis grew 5.8 percent in fiscal 2002, while bonuses soared 48 percent.


If we were able to take into account a larger number of companies, I would bet that the numbers would be closer to the U.S. average, Marx says. Do the numbers lie? Yes.


A larger survey of proxies conducted by the Seattle Times recently found that the median salary and bonuses of CEOs of the Pacific Northwests largest companies fell 5.4 percent last year.


Watching the ticker


Stock options have long been a key component in the compensation of public-company executives. Its no different with Inland Northwest companies, which collectively granted their top-level executives the option to buy nearly 4 million shares of common stock last year, up from 3.1 million shares in fiscal 2001.


Heres how stock options work. A company grants an executive the right to buy a certain number of common shares at a specified, frozen price within a set period. The exercise price typically is set at the market price for the stock on the day the option is granted. If the stock price then climbs, the executive can exercise the option to buy those shares at the lower exercise price, and reap a gain.


If the stock price doesnt climb, or falls, however, the stock options have no value at all, and are referred to as being under water.


Take Dennis Wheeler, chairman, president, and CEO of Coeur dAlene Mines Corp., for example. He was granted the option to buy nearly 400,000 shares of common stock during 2002, at an exercise price of $1.57 per share. With Coeur shares trading recently at about $1.40 a share, those options are under water.


In contrast, Sterlings Gilkey was awarded 30,000 options last year at an exercise price of $14.93. With Sterlings shares currently trading at about $24, those options would provide a profit of roughly $270,000 if exercised today.


Only nine of the 67 executives included in this years compensation analysis exercised stock options they had been granted. Together, those shares provided a gain of about $1.8 million, roughly the same as the exercised options did in fiscal 2001.


There was plenty of money left on the table. As of the close of the companies fiscal years, the 67 executives had $14 million in gains available to them in exercisable, in the money options, and another $5.4 million in options that werent exercisable due to rules attached to them or because they were under water at the time.