Many Executives' Paychecks Swelled, No Matter How They Did

Compensation Tended to Climb Sharply in Three-Year Period

William L. Walton has been chief executive of Allied Capital Corp. for eight years. Many aspects of Walton's job have changed over that time, not the least of which is his paycheck.

Walton's 2005 cash compensation of $5.8 million was more than five times the $876,000 he was paid as a rookie in 1998. In the past three years his salary more than tripled, a bigger increase than any other local public company executive during that time, according to Securities and Exchange Commission records analyzed by The Washington Post.

In an interview, Walton said his pay was directly related to the business investment company's performance, and that in particular Allied was "hitting on all eight cylinders in '05," when he was awarded a $4.2 million bonus and a 5 percent, $71,154 salary increase. The company recorded a 250 percent increase in profit that year.

Not all Washington area executives point to such results.

An analysis of 282 local executives at 109 area companies who have had the same title from 2003 until the end of 2005 showed that merely sticking around gives an executive an excellent chance of getting a raise, sometimes a big one. In many cases, raises are dictated by employment contracts or other compensation practices that have nothing to do with an executive's job performance and are often divorced from the kind of market logic that dictates how most people are paid.

Call it pay to stay.

Chief executive Jon E. Bortz could point to a 45 percent increase in LaSalle Hotel Properties' operating profit in 2005 as well as strong shareholder returns for his 89 percent increase in cash pay from 2003, to $1.06 million. On the other hand, K. Paul Singh at Primus Telecommunications Group Inc. had no such numbers to support his 75 percent salary increase over the past three years: His company's shareholders have lost 62 percent of their investment since then, and his company has had more than $100 million in cumulative losses. He makes $700,000. A spokesman for Primus could not be reached for comment.

From 2003 to 2005, the median increase in cash compensation among the executives studied was 18.7 percent. Cash compensation is the executive's salary and bonus. The median is the midpoint, with half higher and half lower.

When other forms of compensation are included, such as stock options, benefits and other forms of long-term compensation, the median increase was 23.5 percent over that time.

The median increase in Washington area wages during the same period was 8.9 percent, and the regional economy grew at about the same rate.

Of the 282 executives in the analysis, 216 received an increase in cash compensation, including 51 executives who enjoyed a raise of 50 percent or better over the past three years. Five had no change in cash pay, and 61 had a reduction. This latter group, overwhelmingly, received smaller bonuses in 2006 than in previous years or received outsized bonuses in 2003 that weren't subsequently matched.

Only one executive received a smaller salary in 2005 than in 2003: Gary B. Smith, chief executive of fiber-optics-gear maker Ciena Corp., volunteered a pay cut because of Ciena's poor performance over several years.