Gregory Maffei runs four companies and oversees billions of dollars of assets at the Liberty Media family of companies. Overworked, yes. Underpaid, not so much. Maffei reclaimed the title of Colorado’s highest-paid executive in 2014, a spot he also held in 2009 and 2012, with total compensation of $124.1 million across four separate firms. Only a small share of Maffei’s pay, $1.8 million, came as cash salary. The lion’s share, $115.5 million, was tied to stock options, half of which he can claim four years from now and the other half in five years.
“I can’t think of many companies that don’t have a big piece of the executive’s compensation package at risk,” said John Schultz, managing director and co-founder of Compensation & Benefit Solutions in Greenwood Village.
Liberty Media’s founder, John Malone, might take that strategy to an extreme, but a larger share of executive pay is coming in long-term stock options and stock awards, Schultz said.
The Denver Post, using proxy data provided by S&P Capital IQ, examined compensation for more than 500 senior-level executives at 115 Colorado-based companies trading on a major U.S. stock exchange.
The average pay for the top two executives at the 50 largest Colorado companies in market value rose 36.2 percent last year to $6.3 million, pushed up by the large stock option grants assigned to Maffei.
Median pay, the midpoint where half of executives made more and half made less, went the other way, dropping 7.5 percent to $2.95 million, and remains below the $3.67 million median in 2012.
The pay numbers also support what Schultz sees in his work as a compensation consultant. For every $10 in executive pay reported in Colorado last year, $6 came in the form of stock awards or option grants, with only $1.94 coming in cash salary and bonuses.
In 2009, when executives were more distrustful of the stock market, about $2.50 out of every $10 in compensation came in cash money.
After Maffei, the next two highest-paid Colorado executives were the co-CEOs of Chipotle Mexican Grill, who maintained the second and third spots they claimed in 2013.
Chairman and founder Steve Ells reported compensation of $28.9 million in 2014, a 15.2 percent pay raise from 2013, while Montgomery Moran, president, made $28.2 million, a 15.6 percent increase.
Chipotle revised its generous compensation practices after losing a shareholder “say-on-pay” vote last spring, but those reforms came too late to make a difference in 2014.
Paul Rady and Glen Warren Jr. joined the highest-paid list after taking Antero Resources public in October 2013. Rady, Antero’s chairman and CEO, made $27.3 million, while Warren, president and CFO, made $18.3 million.
DaVita Healthcare Partners CEO and co-chairman Kent Thiry remained on the list despite a nearly 20 percent cut in pay to $13.8 million. The Denver-based provider of kidney dialysis has struggled with several regulatory and legal actions against it.
London-based Liberty Global, which maintains a large executive presence in Douglas County, wasn’t included in the Colorado survey.
But if it were, Liberty Global CEO and president Michael Fries, who calls Colorado home, would have been right behind Maffei with $112.2 million in total compensation in 2014.
An interesting trend that emerged last year was the gap between the big pay packages provided at some of the state’s oil and gas producers and the pummeling their shareholders suffered.
Pay at Colorado energy companies ramped up along with production. But when oil prices collapsed late last year, share values followed.
The executive team at Escalera Resources reported a combined $2.97 million in compensation last year, which represented 40 percent of the company’s crushed market value of $7.4 million at the end of the year.
At Emerald Oil, executives took a compensation slice worth 13.7 percent over the overall value, while at Resolute Energy it came in at 13 percent.
To be fair, pay levels were set months before the various compensation committees knew that Saudi Arabia would turn the spigot on and flood the markets.
Sanjai Bhagat, a professor of finance at the University of Colorado Leeds School of Business, said with stock values so depressed, claiming the value of option and stock awards probably will remain an unattainable mirage.
“If executives are paid in a manner consistent with long-term shareholder value, the only way they win is when the shareholder wins,” said Bhagat, adding that in this regard the system is working as it should by not rewarding failure.
Bhagat said that how executives are paid, and whether that pay is tied to shareholder return, matters more in his view than the actual dollar amount awarded — perhaps one reason Liberty Media shareholders aren’t up in arms.
But Sarah Anderson, an executive pay analyst at the left-leaning Institute for Policy Studies, argued that extreme compensation packages can contribute to extreme executive behavior.
“It encourages executives to do whatever it takes to hit that jackpot, all forms of crazy behavior,” Anderson said.
It also enhances the sense of imbalance both within companies and society at large, she said.
The AFL-CIO maintains an executive paywatch site that tracks the gap between CEO pay and average worker pay by state and industry.
For Colorado, its survey shows average CEO pay of $5.24 million, which is 111 times the average worker pay in the state of $47,167.
Measured against the minimum wage, the ratio is 306-to-1.
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or twitter.com/aldosvaldi
