Compensation Study Reveals Food and Beverage Company CEO Pay

When Kraft Foods Inc. split in two, the head of the new Mondelez half definitely worked out a better comp plan than the CEO of the new Kraft Foods Group did. Fifteen million dollars better.

To be fair, Irene Rosenfeld holds both the chairman and CEO titles at Mondelez, the same ones she held at the former Kraft Foods Inc. And W. Anthony Vernon is just a CEO at the new Kraft Foods Group, which is only half the size of Mondelez, not chairman. At $21.6 million and $6.6 million, respectively, they form the top and near-bottom of what food & beverage company CEOs were paid in 2012.

Those numbers and those in the accompanying chart were revealed in May by The Wall Street Journal and Hay Group in a co-branded "2012 CEO Compensation Study." The report looked at compensation for CEOs at 300 of the largest public companies, not just those in the food & beverage category, although that's all we focus on here.

"Top U.S. public companies made only slight increases to executive compensation levels in 2012, as emphasis shifted further toward long-term performance incentives," according to the report, and speaking about the overall list of CEOs. This is the sixth year the two have partnered on the list.

"After seeing CEO pay jump a significant 11 percent in 2010, 2012 marked the second consecutive year that total compensation showed only modest increases. Base salaries grew 1.3 percent to $1.15 million in 2012, while annual incentive payments were flat at $2.1 million. For the third year in a row, however, long-term incentives (LTI) increased, growing 3.8 percent to $7 million. In sum, total direct compensation increased a modest 3.6 percent to $10.1 million in 2012."

That's indicative of the forms of compensation the Wall Street Journal-Hay Group study took into consideration: base salary and primary bonus plus such long-term incentives as restricted stock grants, stock options, performance equity and performance cash.

Poor Larry Ellison. The CEO of Oracle got zero – repeat, zilch – for salary in 2012. But the $90.7 million in stock option grants and other bonuses put him at the top of the list with total direct compensation of $94.6 million.

Kind of similarly (not really), John Mackey, CEO of Whole Foods, also had a base salary of zero. But add to that zero in stock options, zero in bonuses and zero in everything else and the guy really did take home zero pay in 2012. How can afford to shop at Whole Foods? Walter Robb, his co-CEO at the natural grocery chain, got a modest $1.2 million.

CBS' Leslie Moonves was No. 2 overall with $58.8 million. Rosenfeld could do no better than No. 21 on the overall list. Coca-Cola's Muhtar Kent was not far behind her, at $20.6 million.

"Companies sought to make their pay programs more attractive to shareholders in 2012, structuring their executive compensation plans to clearly demonstrate alignment between pay and performance," said Irv Becker, national practice leader of the U.S. Executive Compensation Practice at Hay Group, a global consulting firm. "In the third year of say-on-pay, many companies held pay levels nearly flat, cut perquisites and turned to performance awards as a way to tie executive pay programs to shareholders' desired outcomes."

In fact, for only the second time in the history of Hay Group's study, long-term performance plans were the most heavily weighted piece of the entire pay puzzle, making up 31 percent of the average CEO's total compensation, up from 26 percent the prior year. When it comes to long-term incentives (LTI) specifically, performance awards made up more than half (51 percent) of the LTI value provided to CEOs in 2012, up from 44 percent in 2011. The prevalence of performance awards also increased in 2012, as they were awarded by 80 percent of the companies that grant LTI.

Over the short term, however, it did not necessarily pay to be a top-performing CEO. The top third of net income performers in 2012 improved their company profitability by a median 36 percent, and received a 5.1 percent increase in cash compensation as a result. Low performers, on the other hand, saw profitability decline more than 37 percent in 2012, but experienced only a 4.1 percent decline in cash compensation. All told, top performers fared only 9.0 percentage points better in cash pay increases, despite a more than 70 percent difference in net income change when compared to low performers.

Executive Company Salary Bonus Total Direct Comp
Irene Rosenfeld Mondelez International    $1,550,000 $2,116,000 $21,615,208
Muhtar Kent Coca-Cola Co. $1,550,000 $6,000,000 $20,644,935
Indra K. Nooyi PepsiCo    $1,600,000  $3,300,000 $17,427,736
William R. Johnson Heinz (H. J.) $1,299,618  $3,400,000 $13,819,637
C. Larry Pope Smithfield Foods $1,100,000  $5,692,532 $12,871,032
John F. Brock Coca-Cola Enterprises $1,200,000  $1,607,760 $9,971,042
Kendall J Powell General Mills $1,108,333 $2,081,816 $7,956,672
Jeffrey M. Ettinger Hormel Foods $1,000,220 $1,654,425 $7,663,645
Denise M. Morrison Campbell Soup $950,000 $1,197,000 $6,910,226
Gary Rodkin ConAgra Foods $1,000,000 $1,560,000 $6,805,000
W. Anthony Vernon Kraft Foods $920,404 $947,625 $6,616,345
Donnie Smith Tyson Foods $900,000 $2,499,562 $6,195,562
John Bryant Kellogg $1,076,932 $1,089,000 $5,577,262
Gregg A. Tanner Dean Foods $661,725 $2,120,000 $5,445,752

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