Wal-Mart's Mike Duke Tops in Pay, Dillards Rule in Stock Options

by Gwen Moritz  on Monday, Jul. 22, 2013 12:00 am  

Mike Duke was paid $20.7 million last year as CEO of Wal-Mart Stores Inc., and he cashed out another $7.1 million worth of stock options. (Photo by Ryan Miller)

Mike Duke is the No. 1 guy at the No. 1 company in the world, so it would be a surprise if he weren’t No. 1 on Arkansas Business’ list of the state’s highest-paid public company executives.

And the CEO of Wal-Mart Stores Inc. is at the top of the list — but only because we’ve changed our definition of total compensation. In past years, Arkansas Business added value realized from exercising stock options to the total compensation package that companies reported to the Securities & Exchange Commission. This year, however, we are reporting the cash value of exercised stock options but have not included that amount in total compensation.

This change was made because, under SEC reporting requirements that have become standardized, the estimated value of stock options is included in total compensation when the options are granted. To also include the actual value when the options are exercised is to count the same options twice, although the benefit may come in different fiscal years.

By that formula, Mike Duke’s compensation package of $20.7 million puts him at the top of the list.

More: Get the full list of public company executive compensation.

But if value realized by exercising stock options is included, Duke’s total of $27.8 million is a distant third behind the haul made by the top two executives at Dillard’s Inc. last year — roughly $36 million each for CEO William Dillard II and President Alex Dillard, more than $31 million of which came from stock options.

The phenomenal run-up in the price of Dillard’s stock — from about $3 in the spring of 2009 to a 2012 peak just under $90 — encouraged all of the Little Rock retailer’s top executives to cash out. Chief Financial Officer James I. Freeman realized $18 million from exercising stock options, while Executive Vice Presidents Drue Dillard Matheny and Mike Dillard gained $19.7 million and $18.8 million respectively on their options.

Ranked by compensation coming directly from the company, no Dillard’s executive ranked in the top 10. But the “named executive officers” for whom full financial data was included in Dillard’s annual proxy statement grabbed five of the top six positions when money from stock options was included in the total.

How much public companies should pay executives remains controversial, although government efforts to directly involve shareholders in pressuring directors to rein in executive pay have largely failed.

Take Our Poll: Are public company executives overpaid? Weigh in here.

After three years, the “say on pay” provision of the Dodd-Frank Wall Street Reform & Consumer Protection Act has delivered overwhelming approval of whatever compensation policies directors craft and recommend to shareholders.

“The ‘say on pay’ experiment is a bust,” Jesse Eisinger, a senior reporter covering Wall Street and finance for ProPublica, wrote in June.



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