How we calculated CEO compensation packages Chief executives get more than just a simple paycheck, and sometimes it's tricky figuring out...
Chief executives get more than just a simple paycheck, and sometimes it’s tricky figuring out what they earn.
In addition to salaries and bonuses, CEOs often get miscellaneous payments such as car allowances. Some get incentive payments or stock awards, and in the Northwest most get stock options.
Companies are required to disclose their CEO’s compensation in proxy reports annually sent to shareholders and filed with the Securities and Exchange Commission. For consistency, The Seattle Times 2004 CEO pay report estimates the value of options using the widely accepted Black-Scholes approach. The Times hired Equilar, a San Mateo, Calif., compensation analysis and consulting firm, to gather the data and calculate the option-grant values.
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Black-Scholes is a mathematical formula that relies on several key assumptions. Equilar made the following assumptions: a three-year daily volatility, the full-term of the option, the U.S. government bond yield that corresponds with the full term of the option and the cumulative dividends for the 12-month period before the option grant.
Several companies analyzed by The Seattle Times have been acquired or relocated since their 2004 fiscal year. Boise Cascade, for instance, changed its name to OfficeMax and relocated from Boise to Itasca, Ill., in the second half of the year.
Wilshire Financial Services changed its name to Beverly Hills Bancorp and relocated from the Portland area to California in August 2004.
Boeing was also included in the analysis.
Altogether, the pay packages of 184 Northwest CEOs employed during fiscal 2004 were analyzed. Some companies employed more than one CEO during the year because of turnover. There are now 163 companies based in the Northwest with shares traded on the New York, American and Nasdaq stock exchanges.
All figures and ages are as of the dates of the companies’ proxies.