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Correction to This Article

A chart in the Aug. 16 Washington Business section included incorrect five-year stock returns for two companies. SLM Corp.'s total return over five years was a gain of 150.7 percent, not a loss of 10.8 percent. Coventry Health Care Inc. had a 49 percent gain, not a 23.4 percent loss.

An Aug. 16 Business article on executive compensation in the Washington area incorrectly reported that BearingPoint Inc. had no executive on a list of the area's 100 most highly compensated public company executives. Randolph C. Blazer, chairman and chief executive of BearingPoint, was ranked 72nd in total compensation.

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The Region's Highest-Paid Executives

Friedman and Billings, who are co-chairmen and co-chief executives, each received almost $9 million of their pay in bonuses pegged to profitability as the company gave investors a 170.5 percent total return on the stock, counting appreciation and dividends. FBR's chiefs could have received an additional $2.1 million each in bonuses last year but declined to accept it, according to a company report.

The median total return on local stocks last year was 50 percent, according to Bloomberg LP. For the 30 stocks in the Dow Jones average, it was almost 33 percent.

_____Compensation Report_____
Pay for XM Executives Modest as Stock Recovered (The Washington Post, Aug 16, 2004)
Lucrative Cash Package Came as Fairchild Reported $53.2 Million Loss (The Washington Post, Aug 16, 2004)
Board Members, Executives and Family Members Can Still Benefit (The Washington Post, Aug 16, 2004)
Expense Issue Draws Mixed Views From Companies (The Washington Post, Aug 16, 2004)
Survey Estimates Values of Options, Excludes Exercises (The Washington Post, Aug 16, 2004)
_____Charts_____
Top Compensation Packages
Top Salaries
Superlatives
Trends
_____Industries_____
Aerospace
Biotechnology
Information Technology
Telecommunications
_____Live Discussion_____
Transcript: Washington Post staff writer David Hilzenrath and editor Mike Flagg were online to discuss the 2004 executive compensation survey.
_____Multimedia_____
Audio: Washington Post reporter David Hilzenrath discussed executive compensation on WTOP.
_____Local Executive Pay_____
Chart of Highest Paid Executives
Chart of Cash Compensation
How Washington's Corporate Elite Stacks Up (The Washington Post, Jul 16, 2001)
Compensation Glossary
The Methodology
Stock Options No Longer Guaranteed Windfalls for CEOs (The Washington Post, Jul 16, 2001)
CEOs Do All Right, But for Real Money Look to the Stars (The Washington Post, Jul 16, 2001)
Tech Exec Compensation Climbs (Washington Techway, 7/16/01)

Ranked third by cash pay was Jeffrey J. Steiner, chairman and chief executive of Fairchild Corp., who was paid almost $7.8 million in cash. Fairchild, a distributor of aircraft parts, delivered a return on its stock of 27.9 percent for investors during its fiscal year ended June 30, 2003, or better than double the 11.7 percent median return for other local companies during that period.

A Friedman, Billings, Ramsey executive vice president, James R. Tonkel Jr., ranked fourth with $5.3 million in cash.

No. 5 in cash compensation was Franklin D. Raines, chairman and chief executive of Fannie Mae, the federally chartered mortgage company. Raines received $5.3 million in cash while Fannie, which invests in and packages mortgages for other investors, delivered a return of 19.6 percent last year on its stock, below the median 50 percent for local companies.

Because of its government sponsorship, Fannie has major advantages in the business arena, including the ability to borrow money relatively cheaply, according to government analysts.

While cash is easy to count, other components of executive compensation are harder to quantify, making it difficult to say who earned the most overall. For example, stock options give recipients the right to buy shares in the future at a set price. For every dollar the company's stock climbs above that price, the potential gain from the option increases by a dollar. But that value exists only on paper until the option vests and the executive cashes it in.

To compare executives by total compensation, The Post estimated the value of stock options based on an assumption that all stocks in the survey will rise 5 percent compounded annually over the life of the option. Companies are allowed to use 5 and 10 percent assumptions or a usually more conservative method called Black-Scholes when reporting compensation to the Securities and Exchange Commission. The Post uses the 5 percent valuation because companies use varying or undisclosed assumptions when they use the Black-Scholes model.

Danaher Corp.'s president and chief executive, H. Lawrence Culp Jr., had the highest total compensation with an estimated $57.5 million. Of that, $26.5 million represented the potential value of stock options and $27.3 million was in restricted stock. Culp could take possession of the restricted stock in 2010 if certain conditions are met.

The total was an 1,800-percent raise for Culp, who was No. 69 a year earlier and was promoted to his position in 2001. Danaher, founded by brothers Steven and Mitchell Rales, makes industrial controls and tools. The company delivered a healthy return on its stock of 39.8 percent last year, higher than the Dow Jones industrial average stocks but lower than the local median. By the end of the year, the paper value of Culp's restricted stock award had risen from $27.3 million to $35.7 million, Danaher reported.


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