The economic slowdown apparently didnt staunch the flow of money to top-level Inland Northwest executives last year.


Executives of publicly traded companies in Spokane and North Idaho, on average, saw their paychecks grow a hearty 7 percent in 2001, an annual analysis by the Journal of Business shows.


The analysis, of the compensation of about 70 executives, found that their overall average pay, including perks and long-term incentive pay but not stock options, climbed to about $283,000 in their employers 2001 fiscal year, compared with about $271,000 for the same set of executives in the previous year. Counting just salary and bonuses, the average executives pay grew just over 5 percent, to $253,000.


The information for the analysis came from the proxy statements of 16 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.


Topping the Journals list of the 40 highest-paid public company employees is Itron Inc. CEO LeRoy Nosbaum, whose 2001 compensation totaled about $843,000, up 33 percent from fiscal 2000. Nosbaum became chairman this year.


Itron stood out among technology companies here last year, seeing its annual earnings climb by nearly 400 percent and its stock price rise by more than 700 percent during the year. As a group, Itrons top executives enjoyed substantial bonuses that propelled their overall compensation upward by an average of 18 percent.


Following Nosbaum in the top five were CEOs Dennis Wheeler, of Coeur dAlene Mines Corp., whose overall pay climbed 17 percent to about $734,000; Potlatch Corp.s L. Pendleton Siegel, with pay of just over $600,000, up 1.8 percent; Arthur Brown, of Hecla Mining Co., up 20 percent to about $591,000; and Coldwater Creek Inc.s Georgia Shonk-Simmons, whose overall pay fell more than 18 percent to about $518,000.


Shonk-Simmons, one of only three women among the 40 highest-paid executives here, was ranked No. 1 last year, but fell to fifth amidst a tough year for Coldwater, the Sandpoint-based specialty retailer. As a group, Coldwaters top executives saw their pay fall about 27 percent last year. What bonuses were paid were small. During the year, the companys net fell about 86 percent, and its stock price dropped about 32 percent.


Notably, Coldwaters chairman and vice chairwoman, Dennis and Ann Pence, each chose to forfeit $75,000 of their salary to fund hourly employee Christmas bonuses, the companys proxy says. The two company founders each still made about $229,000, down 48 percent from 2000.


Meanwhile, Rob Fukai, the former Avista Corp. vice president, ranked sixth on the list this year, up from 33rd place last year, but that was due to a big payday on his departure. Fukai, who left Avista in October of 2001, received total compensation that year of over $512,000, only about $165,000 of which was salary. Included in his $348,000 in other compensation was $195,000 for severance, $91,000 toward his retirement plan, $45,000 in unused time off, and 12 months of additional health insurance.


Last fall, when Avista announced Fukais departure, it said that he had left the company and was pursuing new career opportunities. Asked this week why Avistas proxy included severance pay for Fukai when the original release suggested he was leaving on his own accord, Avista spokesman Hugh Imhof said the company had undergone a reorganization in Fukais area, and that as a result, his position was eliminated. The money he received when he left was part of a separation agreement that amounted to part severance and part early retirement, Imhof said.


Because of his departure, Fukai out-earned his former boss, Avista Chairman, President, and CEO Gary Ely. Ranked eighth, Ely had total compensation of about $504,000, up some 7 percent from last year.


In years past, Avista regularly had been represented in the lists top five, with former chairmen Paul Redmond and Tom Matthews both having received annual executive compensation of more than $1 million. Since Matthews departure, however, the big energy companys top brass have fallen in the ranks among the areas highest-paid executives as it has worked through a difficult energy market and corporate stumbles. Ely ranked 17th on last years list.


Rounding out this years top 10 were Sterling Financial Corp. executives William Zuppe and Harold Gilkey. Zuppe, the bank holding companys president and chief operating officer, had total compensation of about $491,000, up 17 percent, while Gilkey, its chairman and CEO, received about $488,000, up 7 percent.


Unexpected increase


Just why executive compensation climbed here in 2001 amid a depressed economy isnt clear. The same study last year, which included some but not all of the executives in this years analysis, suggested that executive pay in the Inland Northwest was stagnant at best in fiscal 2000, declining about 1 percent.


Executive-pay experts here predicted last summer that the numbers for 2001 might reflect a steeper decline, considering the downturn in the economy. That didnt happen.


One of the possible reasons, says Spokane headhunter Jeannine Marx, is that the incentive-related pay executives receive often is for performance in the previous year, so a decline might not appear until next year.


Also, economic observers here have noted that the Inland Northwests economy doesnt always immediately reflect changes in the national economy, due to its isolation and lack of manufacturing jobs.


There are advantages and disadvantages of being in the time warp, says Marx, owner of JM Recruiting. We run the risk of seeing the numbers in 2003 and 2004 showing what other communities our size saw this year.


Perhaps we havent felt the aftershocks (of the down economy) yet, she adds. The question is, will the aftershocks be significant. I dont think the swing will be large.


Ken Rogers, a senior recruiter at Promanix, the executive-placement arm of Humanix Corp., of Spokane, says the pay packages hes seeing continue to show stagnant growth.


It would be less than the 7 percent shown in the Journals analysis, Rogers says. The companies Ive talked to have pretty much wanted to keep pay at current levels.


In general, compensation trends reflected in the proxies for 2001 seemed to track the overall performance of the companies that filed them.


Most of the employers showed financial improvement, though for some that meant posting a smaller loss than they had the previous year. Companies such as Itron, Coeur dAlene Mines, Sterling, Hecla, AmericanWest Bancorp., and WestCoast Hospitality Corp. all showed gains, and also rewarded their top executives with better pay, at least on average. On the other hand, companies such as Avista and Coldwater Creek, whose earnings were sharply lower in 2001, paid their top execs less money, on average.


Potlatch and Key Tronic Corp. both saw their earnings fall in 2001, but increased their executives pay an average of 5 percent and 6 percent, respectively. Both generally have been conservative in their executive pay increases in recent years.


The options game


Some analyses of executive pay take into account the potential future value of stock-option grants. That can be sticky, as some companies are finding in their effort to include the cost of such options in their net income. Much debate lies ahead in just how to value them.


Heres why: Through stock options, a company grants an executive the right to buy a certain number of its 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 thus are referred to as being under water.


Avista CEO Gary Ely, for example, was granted the option to buy 50,000 shares of Avista stock during 2001, at an exercise price of $16.48 per share. With Avista shares currently trading at about $12 a share, those options are under water. Ely also was granted the option to buy another 145,000 shares at an $11.80 exercise price, close to the current trading level.


The rewards can be big. Itron last year granted Nosbaum the option to buy 100,000 shares of its common stock at $7 a share. With Itron stock currently trading at around $14 a share, even after negative reports hammered the price this summer, Nosbaum would pocket about $700,000 if he exercised his option today.


Another way to evaluate stock options as a component of executive pay is to count them as compensation when theyre exercised. Only a handful of the executives included in this years analysis exercised stock options during 2001. The most notable was Itron President and COO Robert Neilson, who exercised options to buy more than 72,000 shares, at a profit of more than $1.2 million.


Executive recruiter Marx says shes finding in the executive compensation packages shes seen that salaries are becoming more conservative, and that the big potential for pay is tied to incentives, whether thats through stock options in publicly traded companies or equity stakes in private ones.


Rogers sees more executives balking at that pattern.


A lot of execs were burned in the late 1990s, taking a lower pay scale and a higher number of options, and then seeing their options become worthless, he says. Today, They still want the options, but it has to be a solid company, and theyre saying pay is a bigger incentive for me.