Pay Soars for Dillard's Executives As Stock Value Rises

An increase in the value of Dillard's Inc. stock propelled three members of the Little Rock retailing family into the top 10 of highest-paid executives at Arkansas public companies.

(Click here for a PDF list of public companies' executive compensation. A spreadsheet version is also available.)

(Click here for a PDF list of public companies ranked by net income and here for a PDF of the top public financial institutions.)

As usual, the CEO of Wal-Mart Stores Inc. led the annual list, which is based on total compensation during the most recently completed fiscal year. Michael Duke earned $18.3 million in total compensation in 2011. Coming in at Nos. 2 and 3, however, were Dillard's President Alex Dillard with $16.4 million and his CEO brother, William Dillard II, with $15.1 million.

Alex Dillard had ranked No. 14 on Arkansas Business' list last year, which recorded 2010 compensation, with $4.8 million in pay. William Dillard was No. 15 last year with $4 million.

At No. 8 was Drue Matheny, a Dillard's executive vice president and sister of Alex and William. Her pay package in 2011 almost quadrupled in value compared with 2010, rising from $2.6 million to $9.5 million. Matheny had languished at No. 27 on last year's list.

Four other members of the Dillard family - Mike Dillard, William Dillard III, Denise Mahaffy and Alexandra Dillard - and a longtime Dillard's executive - CFO James Freeman - are also on the list of 89 executives whose salaries are revealed in annual proxy statements. Alexandra Dillard, daughter of Alex, is a name new to the list. The divisional merchandise manager earned $152,568 in 2011, placing her at No. 88.

Eight of the 17 public companies based in Arkansas reported an increase in net income. Here, too, Dillard's shone, with its income rising to $463.9 million compared with $179.6 million a year earlier.

Forty-four of the executives earned at least $1 million, compared with 43 in 2010. Six executives were in eight-figure territory on this year's list, which uses compensation data for 2011; that number was only three last year, based on 2010 data.

Arkansas Business' annual list of public companies' executive compensation is compiled using information found in the annual proxy statements of Arkansas' publicly traded companies filed with the federal Securities & Exchange Commission.

Jeff Fox, the Little Rock resident who serves as CEO of Convergys Corp. of Cincinnati, also is ranked (at No. 21) for good measure.

Total compensation is calculated using all compensation reported in the proxies, plus the actual value realized from the exercise of stock options during the year.
Other highlights:

  • Duke's compensation slipped in 2011, falling to $18.3 million compared with $18.7 million in 2010.
  • The list features 15 new names. Among them are Neil Ashe, EVP of Bentonville-based Wal-Mart; John Roberts III, president and CEO of J.B. Hunt Transport Inc. of Lowell; and Scott Howe, CEO and president of Acxiom Corp. of Little Rock.
  • More than half - 43 - of the 74 who were on the list both years saw total compensation rise.
  • Thirty-three of the executives exercised stock options.
  • This year's list is down by one public company, ThermoEnergy Corp., a wastewater treatment and power generation technology firm that moved its corporate headquarters from Little Rock to Massachusetts.
  • The list features a number of executives who have since left their companies, including three with Acxiom. They are John Adams, former chief operating officer and executive vice president; Shawn Donovan, a former EVP; and Christopher Wolf, former CFO and EVP. Scott Howe, named Acxiom CEO in July 2011, made the list with total compensation of $6.1 million.
  • Another high-profile departure was David Wood, who resigned as CEO and president of Murphy Oil Corp. of El Dorado in June. He was No. 4 on the list with $13.7 million in pay.

The big bump in Dillard's executives' pay came primarily in the form of "other compensation" and in the exercise of stock options. In the retailer's case, the increase in Dillard's pension value accounted for most of the other compensation. For example,

Alex Dillard's other compensation totaled $8 million, of which $7.8 million was the improved pension value. Dillard also realized $3.7 million in the sale of his company's stock.

Josh Henke is managing director of Longnecker & Associates of Houston, an executive compensation and corporate governance consulting firm. The Dillard's surge in pay didn't surprise him. Improved company performance justifies a hearty compensation package, he said.

"If they're performing and they're returning it back to shareholders, [the pay package] works well on the upswing," Henke said. "The true story is, how does it work on a downswing? ... If they're not returning that value to shareholders in a downturn, are they going to have the reciprocal reaction to that?

"That's the true telling if a compensation package is set up for true pay for performance."

Dillard's stock rose 18.3 percent in 2011 to close at $44.88. It has performed even better so far in 2012, rising 68.4 percent to close at $74.19  on Wednesday.

That strong showing, should it continue, may mean even bigger paydays for the Dillard family next year and has the potential to push one of them to the top of the executive compensation list.

Looking Nationwide

2011 was a good year for CEOs throughout the United States, according to the Associated Press. The AP reported in May that CEO pay had risen 6 percent compared with the prior year.

The AP, using a somewhat different definition of total compensation, analyzed 322 companies in the Standard & Poor's 500 and used data from Equilar, an executive compensation consulting firm. Median CEO pay was $9.6 million in 2011, the AP said.

In June, The New York Times, also using Equilar data, published its own analysis of executive pay at the nation's largest corporations.

The top executive on The Times list was Timothy Cook of Apple, who made $378 million in 2011. The only Arkansas CEO on the list was Wal-Mart's Duke.

(To read about efforts to ensure management at public companies is held accountable, click here.)