Executive compensation: 2006 annual report

  • Article by: JOHN J. OSLUND and PATRICK KENNEDY
  • Updated: July 31, 2006 - 11:37 AM

Executive paydays are bigger than ever, and of the 10 best-rewarded Minnesota CEOs, four headed firms with negative returns last year.

Two out of every three CEOs in the Star Tribune's annual survey of Minnesota's 100 highest-paid executives enjoyed paydays of seven digits or higher in 2005.

For the second consecutive year, average total compensation for Minnesota CEOs climbed well over $1 million. Median total compensation jumped 59.3 percent to $1.791 million -- the highest since 1997, when the newspaper began tracking total compensation using the same methodology.

The gain in median pay for Minnesota CEOs was nearly four times the 15.8 percent gain found in April's national survey of 350 CEOs conducted by the Wall Street Journal and Mercer Human Resources Consulting.

While the median total CEO pay package in the Journal's national sample is far higher ($6 million), Gopher state CEOs are certainly playing catch-up. In 1999, at the peak of the tech bubble, just 46 Minnesota CEOs were making $1 million or more.

Surveyed CEOs paid at least $1 million:

1999
46

2000
36

2001
43

2002
45

2003
47

2004
55

Total pay for Minnesota CEOs declined in 2002, reflecting the recession and falling stock markets in 2000 and 2001. But by 2003, executive pay recovered its upward trajectory.

Last year, it went vertical.

Even after excluding the unusually large 2004 payday of UnitedHealth Group CEO William McGuire, total pay for the other 99 CEOs still jumped 45 percent in 2005 to $431 million from $297 million in 2004. The lowest-paid CEO on our list took home $379,000 last year, about 11 percent higher than 2004.

Total compensation includes salary, bonus, restricted stock grants and gains from previously issued stock options and other compensation. McGuire, who ranked No. 1 on our list in 2004, did not exercise any stock options last year, which explains his 2005 ranking of No. 11.

The across-the-board surge in all categories of CEO pay comes despite modest stock-market performance by Minnesota firms. Nearly half -- 48 of 99 -- had negative one-year returns.

Total return for the Standard & Poor's 500 index rose just 4.9 percent in 2005, while the Bloomberg-Star Tribune index of Minnesota's 100 largest companies turned in an even more anemic 2.9 percent total return.

Among companies employing the 10 highest-paid CEOs, the one-year total return to shareholders was negative at four: Polaris, TCF, 3M and Digital River.

HIGHEST TOTAL PAY
Bob Ulrich, Target
$45 million

HIGHEST SALARY
William McGuire, UnitedHealth
$2.2 million

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