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Pay for XM Executives Modest as Stock Recovered

By Jerry Knight
Monday, August 16, 2004; Page E01

You won't find Gary Parsons and Hugh Panero, the top executives of XM Satellite Radio Holdings Inc., on this year's list of Washington's highest paid executives, even though they made more money for their stockholders than most of the people on the list.

XM was the Washington region's best performing stock last year, worth almost 10 times as much at the end of the year as it was at the beginning, when investors were bailing out because it looked like XM might be headed for bankruptcy.

2003 compensation for XM executives Hugh Panero, top, and Gary Parsons, below, was relatively modest. (Xm Satellite Radio)

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As the stock climbed to $26.69 a share from $2.69, and XM issued more than 38 million additional shares, the company's market capitalization -- the price of all its stock -- jumped to $3.3 billion from about $230 million, a gain for shareholders of more than $3 billion.

Parsons, the chairman of XM, took home a $250,000 salary and a $500,000 bonus last year. Panero, the president and chief executive, collected a $412,000 salary and an identical bonus. With cash compensation of $750,000 and $824,000 respectively, neither Parsons nor Panero made The Post's list of the 100 executives who earned the most cash last year working for public companies based in the District, Maryland and Virginia.

Nor did the two make the top 100 in total compensation for 2003 even though both got significant amounts of stock options -- 400,000 shares for Parsons, 350,000 for Panero. Their options were dispensed late in the year at $22 a share for stock now worth around $25.

Considering how well XM stock performed last year and how much the market value of the company increased, Parsons and Panero might be considered some of the most underpaid executives of the year.

But they were also in charge when the stock plunged from almost $46 a share in 2000 to less than $2 in 2003. It looked then like XM might run out of money before its satellite broadcasting business got off the ground.

The XM story exemplifies how quickly executives, like sports teams, can go from being bums to heroes. To shareholders who bought the stock when it was cheap, Parsons and Panero were underpaid last year. But tell that to investors who bought the stock when it was rocketing, watched it fall like a satellite flaming into the atmosphere and are holding stock that is still worth less than they paid for it.

Parsons' pay did sink along with XM stock. He took no salary in 2001 and 2002, collecting only bonuses based on internal performance criteria -- $425,000 the first year and $500,000 the second, when he took his salary in stock.

Thanks to the Securities and Exchange Commission, shareholders now get a long-term picture of how their stock is doing, which helps in evaluating executive pay. The stock's performance over the previous five years must be reported in the proxy statement that is sent to every shareholder in advance of the annual stockholders' meeting.

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