Among Public Home Builders, C-Level Pay Adjusts Downward
We continue to put focus on executive pay at a number of public home builders (10)–the ones who have already posted proxy filings among their annual financial performance reports.
So far, we’ve learned that for CEOs and CFOs — whose average total compensation packages took an aggregate hit of 26%, primarily in the bonus and long-term incentive areas of their deals–managing a balance sheet, downsizing operations by 65% or more, and flashing hints of a product and land position portfolio that can make some hay with a big assist from Uncle Sam is tantamount to good company performance.
Now that the government-fueled taxpayer tailwinds are due to taper off to zero in the coming weeks, the heat on chief operators, by title or function, will rise a notch or two. It was finance folks who got lots of the credit for their effectiveness in retrieving tax bounty from the government against losses on tranactions in the past 60 months. And it’s been the CEO and the CFO who’ve applied the screws to cost plans in an effort to right-sized headcounts, market presence, and land pipeline to a reality whose ferocity may only now be coming clear.
Now, and for the next 18 to 24 months, it’s operator time. People, product, process, and performance, must each and all outdo prior measures of best practice for a company to remain in the ranks of the healthy for the next two years. What’s interesting to note about this amalgam of executives below is what’s missing as much as what’s there.
In more than a few cases–Beazer, Brookfield, D.R. Horton, Hovnanian, KB Home, Ryland, and, big surprise, NVR–the firms have managed, at least for the moment, to go it altogether without a COO. In a couple of cases, like KB and Ryland, a former COO has taken the top job, leaving the title vacant. In at least two, the former COO is out in the field, running a division; the corporate budget can’t support the position.
The top three on the list–David Mandarich of M.D.C., Zvi Barzilay of Toll Brothers, and Jonathan Jaffee at Lennar–reflect a strategy’s reliance on a strong, strategic, decision-maker with broad sway over their respective enterprises. In many cases, companies are turning to division and regional presidents to run their business units toward improved gross margin and business unit profitability.
In a sense, this list illustrates the many hats a corporate executive wears these days, as finance, operations, marketing, and real estate tactics meld into fewer discrete functional areas in a reduced-capacity home building landscape. In this group, the aggregate average pay fell just over 13% to an annual total compensation package of $2.6 million from $3 million in 2008.
Here’s the latest ranking (click twice on the table for an enlarged image):
Source: Big Builder analysis of company proxy filings.
While we’re at it, we thought it might be fun to do a comparison ranking of the 10 companies’ C-level comp packages, year on year. Since “named executive officers” do not each have to have the same title and function, and in some cases, we’ve seen a bit of turnover in the ranks, this is not intended as a precise-dollar apples to apples comparison.
You’ll need to note as well, that when companies benchmark executive comp from among their peers, they tend to look at separate buckets for “base,” vs. “bonus,” vs. “long-term incentive” in order to compare their own C-level compensation with companies like theirs. So, the aggregate number doesn’t tell you much beyond a company’s wherewithal and its relative loyalty to tenured executives.
NVR, it shoud be said, draws attention to the home building peer company benchmarks only to mostly disguard them in much greater favor of reflecting the performance of the organization insofar as its alignment with shareholders’ and stakeholders’ interests.
Anyway, it’s an interesting scorecard, which illustrates that, in total, the “Three Cs” annual total comp (the total packages of the three named executives) averaged $9.7 million in 2009, down 8.9% from $10.7 million in 2008. (click twice on the chart for an enlarged image.)
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