The bar is rising.


Executives of publicly traded companies here enjoyed big pay hikes on average during their employers most recent fiscal yearevidence, some say, that Spokane-area companies increasingly must open their coffers wider to attract top talent.


A Journal of Business analysis of the compensation of about 70 executives of public companies in Spokane and North Idaho found that executive salaries and bonuses grew an average of 9.1 percentto about $266,000in fiscal 1998, based on figures disclosed by the companies in their most recent annual proxy statements.


Overall average pay for the execs, including perks and long-term incentive payments but not stock options, shot up 13.3 percent to nearly $314,000, the disclosure documents reveal.


In a similar analysis last year, the Journal of Business found that salaries and bonuses here rose 7.3 percent in fiscal 1997 and that overall pay that year grew 5.1 percent. That analysis included some but not all of the execs studied this year.


Executive pay gains here apparently outpaced those at the nations largest public corporations. The Wall Street Journal reported this spring that the median salary and bonus among CEOs of those companies rose 5.2 percent in fiscal 1998. The newspaper said the paychecks of non-union salaried workers in the U.S. rose 4.2 in 1998. (Note that the Wall Street Journal uses median, rather than average, in its comparative calculations. The median increase in the Spokane study was 9.6 percent.)


Drawing conclusions from comparisons between the national and local studies might be difficult, however, since with so few public companies here, the ebbs and flows of their individual corporate prosperitiesand thus the fortunes of their executivescan sway overall averages. One trend, though, might be emergingthat the world is getting smaller, and to be competitive, companies here must pay worldly compensation.


Just in employment in general, its getting more difficult to find that talented global executive, says Spokane headhunter Jeannine Marx, of JM Recruiting. Its going to force the companies (here) to raise the bar because the individuals are more in demand than theyve ever been before. Spokane is not immune to what is happening around the country.


The top execs


The greater gains in salary and bonuses here were fueled in part by significantly higher pay at one of Spokanes newest corporate headquarters, Potlatch Corp., which moved here in the fall of 1997 from San Francisco. On average, Potlatchs top five executives enjoyed pay hikes of over 40 percent for the year, though they collectively had taken significant hits the year before.


The higher 1998 pay was due mostly to bonuses, which were paid that year but not the year before, and are based partly on Potlatchs performance as measured by return on equity, which surpassed the industry standard in 1998.


John M. Richards, who recently retired as chairman and CEO of Potlatch, received salary and bonuses totaling $838,375, compared with $541,970 in fiscal 1997. His overall pay was $861,965, placing him third on the list.


The two top spots in overall compensation went to Avista Corp.s new chairman, president, and CEO, Tom Matthews, and to former Itron Inc. chief strategist Carl Aron, who left Itron during the fiscal year. Both executives had salary and bonuses totaling just over $500,000 for the year, but both also received big payoffs, Matthews for joining Avista and Aron in connection with leaving Itron.


In addition to his regular salary and bonuses, Matthews received a signing bonus of $1 million ($700,000 of which was deferred under a company investment plan) and a restricted stock award of $2 million (which will vest over five years) in connection with his employment agreement, giving him overall compensation for fiscal 1998 of a heady $3.5 million. Because Matthews has been with Avista for only one fiscal year, his compensation wasnt included in the year-to-year comparison of average compensation in this analysis.


Aron, meanwhile, received $895,546 in connection with leaving Itron. His regular compensation, which totaled about $506,000 in 1998, grew just 3.4 percent from fiscal 1997, when he was ranked sixth among top public-company executives.


Similarly, Avistas retired President and COO W.L. Les Bryan, who ranked fourth this year in compensation with $674,408, received $350,000 of that as the first of two annual payments in connection with his retirement and non-compete agreement with Avista. Hell receive another $350,000 next January. Last year, he ranked 19th in the survey.


The fifth executive on this years list previously had been the first. He is former Avista chairman and CEO Paul Redmond, who retired June 30, 1998. He earned $664,470 in fiscal 1998, including about $226,000 for 821 hours of unused paid time off. In the previous year, Redmond was paid $886,638.


Rounding out the top 10 this year were: Pendleton Siegel, Potlatchs president and COO during fiscal 1998 and now its chairman and CEO, with total compensation of $618,833; Coeur dAlene Mines Corp. Chairman Dennis Wheeler, at $612,283; Sterling Financial Corp. Chairman Harold B. Gilkey, at $483,705; Hecla Mining Co. Chairman Art Brown, at $436,275; and retired Itron Chairman Johnny Humphreys, at $424,980.


Missing companies


Noticeably absent from this years list were executives of Pegasus Gold Inc., which was dismantled in U.S. Bankruptcy Court last year, and Egghead Inc., which moved its corporate headquarters from Spokane to Vancouver, Wash. Former Pegasus CEO Werner Nennecker had been a fixture among the highest-paid execs here, having ranked fourth on last years list with total compensation of about $642,000. Not so high flying was Egghead CEO George Orban, who ranked 30th last year with compensation of just $220,000.


Mining companies continued to be hard hit in the market during fiscal 1998, and the pay of their top executives reflected that. Coeur dAlene Mines Wheeler took an 18.5 percent cut in overall pay for the year, while Heclas Brown saw only a 2 percent increase overall and Gold Reserve Corp.s Rockne Timm received no increase in pay.


Also of note, Cavanaughs Hospitality Corp. President and CEO Don Barbieri and the companys chief financial officer, Art Coffey, both dropped dramatically on the list. Barbieri fell to 36th, from 11th last year, and Coffey dropped to 40th, from 17th. Both had received big bonuses in 1997, following Cavanaughs move to go public.


Supporting growing concern here about the lack of opportunities for women, the list of top executives includes just two female executives, both of whom work at Sandpoint-based Coldwater Creek: company co-founder and Chairman Ann Pence, and Georgia Shonk-Simmons, Coldwaters chief merchant.


For this story, the Journal of Business tallied compensation in four general categories: salary, bonus, long-term incentive-plan payouts, and other. (See chart page A10.) The latter category typically includes a variety of compensation, from perks and relocations expenses to consulting fees and company contributions to various retirement plans, although this year some companies also included under that category such things as signing bonuses and cash paid on termination of employment.


Where disclosed, the Journal of Business included the award of restricted stock, which is stock granted outright to the executive, without cost, but with limitations on when it can be redeemed. In the earlier-mentioned case, Avista granted Matthews restricted stock valued at $2 million, as of July 1, 1998, his date of hire. For the purpose of the accompanying chart, that value is listed under long-term payouts.


The Journal didnt include awards of stock options, the value of which can vary depending on the price at which a companys shares are selling when the options are exercised. Through stock options, an executive receives a right to buy a certain number of a companys common shares at a specified price; the executive then has a certain period of time in which to exercise that right. If the companys stock price appreciates before the executive buys the shares, he or she reaps the gain.


For instance, in addition to his other compensation, Potlatchs Siegel was awarded stock options for 34,000 shares at an exercise price of $37.75 per share. Since then, the companys stock has risen in value to about $43 a share. If the share prices are the same when the options are exercisablefor half the stock this December and the other half a year laterhe could exercise his options and reap a gain of about $187,000.


Making assumptions


Because the executive compensation levels studied for this story represent only the pay of executives of 13 publicly traded Inland Northwest companies for which disclosure information was available, they dont necessarily correspond with the compensation received by the execs of privately held concerns, which make up the bulk of Spokanes employers.


Still, some parallels can be drawn, since private companies must compete with public ones for top talent, says Marx. She believes that, generally, public companies pay more than private ones, but one can expect that such employers as Packet Engines Inc. and Telect Inc. have had to offer comparatively high compensation packages to recruits.


Marx says that Spokane long has portrayed itself as a place where employees are abundant and inexpensive, and that that message has become a self-fulfilling prophecy. As a result, she says, the community now faces concerns about the below-average incomes of its residents. With that in mind, Marx says, Its encouraging to have companies seeing the global value of their employees, as reflected in higher executive salaries.


The bar, indeed, is rising. When the Journal of Business looked at executive compensation in 1993, only five executives in the study made more than $300,000. In this years survey of 1998 pay, that number had climbed to 18.