Copyright 1998 by Journal of Business


Despite some sizable pay cuts at Spokanes two largest corporations, executives of publicly traded concerns here on average enjoyed handsome raises during their employers most recent fiscal year, according to disclosure documents.


A Journal of Business analysis of the compensation of more than 70 executives of public companies in Spokane and North Idaho found that executive salaries and bonuses grew an average 7.3 percentto about $266,000in fiscal 1997, 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, grew 5.1 percent to about $297,000 in 1997, the disclosure documents reveal.


In a similar analysis last year, the Journal of Business found that salaries and bonuses here had slipped an average 2 percent in fiscal 1996 and that overall pay had gained just 3 percent. That analysis included some but not all off the execs studied this year.


Spokane headhunter Jeannine Marx says this years boost in executive pay is due partly to an increasing trend of companies here attracting new execs from elsewhere in the country.


They are driving up the salary levels, says Marx, who owns JM Recruiting here. Its costing more to get people to come in. Quality of life is just not enough now, folks. They want quality of life and money.


Still, the growth rate in executive compensation here falls short of that of the nations largest public companies. The Wall Street Journal reported this spring that the salaries and bonuses of the chief executives of those big national corporations rose an average of nearly 12 percent in 1997.Much smaller paychecksMost notable about the 1997 figures were revelations of big swings in compensation among some executives. Washington Water Power Co. Chairman and CEO Paul Redmond, for instance, took a 37 percent pay cut in 1997. The outgoing utility executive, who despite the cut remains atop the list of highest-paid public executives here, received $886,638 in total compensation, compared with about $1.4 million in 1996.


That year, about $850,000 of Redmonds overall pay was in the form of bonuses and long-term incentive payments. Last year, he received no bonuses, and a much lower $267,000 in long-term payout, which came in connection with the success of WWPs non-utility investments.


Similarly, WWPs next four most highly paid executives saw big declines in overall pay in 1997, ranging from CFO Jon Eliassens 34 percent fall to Vice President Rob Fukais 22 percent pay cut, according to WWPs most recent proxy statement. WWP spokesman Pat Lynch says the lower pay was due mostly to the absence in 1997 of utility-side bonuses, which are paid when certain company performance targets are met. Those targets were met in 1996, but not in 1997, he says.


The story was similar at Potlatch Corp., which moved to Spokane last fall from San Francisco. All five of its top executives took big pay cuts in 1997, following receipt of hefty bonuses a year earlier. Its top executive, Chairman and CEO John Richards, received about $672,000, down about 20 percent from the year before, but enough to place him third among top-paid public execs here.Hefty raisesIn contrast, Coeur dAlene Mines Corp. and Itron Inc. both doled out hefty bonuses, giving their top executives sizable compensation gains.


Dennis Wheeler, chairman, president, and CEO of Coeur dAlene Mines, landed a $330,472 bonus on top of his $394,417 salary. Including miscellaneous compensation, Wheeler made $789,698 in 1997, up nearly 26 percent from the year earlier and enough to keep him in second place behind Redmond among the highest-paid corporate execs here. The Coeur dAlene-based mining companys other top four executives in 1997 also received big bonuses, but three of them since have left the company.


Coeur dAlene Mines reported a net loss of $24.6 million attributable to commons shareholders in 1997, though that loss was well below the about $63 million deficit it posted in 1996. The companys revenues and assets both gained markedly in 1997.


The biggest compensation gains of the year, meanwhile, came at Itron, the Spokane maker of utility-meter reading equipment. Itrons five highest-paid execs, all of whom placed among the 20 highest paid in the Spokane area, saw their overall pay soar an average 62 percent in 1997. Itron President and CEO Johnny Humphreys made just under $600,000 for the year, a 59 percent jump over his 1996 compensation. He placed fifth on the list. His chief strategist, Carl Robert Aron, was next at about $502,000 for the year, up 63 percent. Company CFO David Remington shot up to the 10th spot from 27th on last years list. His total compensation was just under $400,000, up about 86 percent.


Itron posted net income of $1 million in 1997, much improved from the about $1.5 million loss posted in 1996. Revenues, assets, and shareholder equity all also grew substantially in the year.


In contrast, financially troubled Pegasus Gold Inc., which posted a $512.8 million loss in 1997 and now is in bankruptcy proceedings, awarded its president and CEO, Werner Nennecker, with a $280,000 bonus in 1997. That kicked his overall compensation up to about $642,000, enough to keep him in fourth place among Spokanes highest-paid execs despite Pegasus problems.


Other Spokane-area executives to make the top 10 in addition to Redmond, Wheeler, Richards, Nennecker, Humphreys, Aron, and Remington, are: Arthur Brown, chairman, president, and CEO of Hecla Mining Co., who dropped to seventh from fifth; Harold Gilkey, chairman and CEO of Sterling Financial Corp., who slid to eighth from sixth; and newcomer L. Pendleton Siegel, president and COO of Potlatch, at ninth.


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 A29.) The latter category can include a variety of compensation, from perks to company contributions to various retirement plans to consulting fees to relocation expenses.


The Journal didnt include awards of restricted stock or stock options, the value of which depend on the price at which a companys shares are selling at any given time. 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 shares, he or she reaps the gain. Companies also sometimes grant what are called restricted stock awards, which means that the executive receives the stock outright, without cost, but with limitations on when it can be redeemed.Attracting top talentBecause the executive compensation levels studied for this story represent only the pay of executives of 14 publicly traded Spokane-area 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 made, since private companies must compete with public ones for top talent, says Marx. She adds that such private companies as Packet Engines Inc. have had to offer hefty pay packages to lure top talent to Spokane. The people that Packet brought in cost them a chunk of change, because they paid national wages, she says.


She says such activity is having an impact on the overall executive pay scale here.


We used to have a local scale, a regional scale, and a national scale, Marx says. Last year we seemed to make the huge jump to a regional scale. I think this year youre going to see us move up to the national scale.


She says companies here are recruiting nationally for management personnel, and such people today are more knowledgeable about the employment market and know there is a shortage of top talent.


The bar is rising. When the Journal of Business looked at executive compensation in 1993, only five executives in the study made more than $300,000. By last year, that number climbed to 11 executives, and this year 14 topped the $300,000 mark.