Two $21 million pay packages granted to executives of a tiny biotechnology company put them atop the compensation rankings for Long Island public companies, according to Securities and Exchange Commission filings analyzed for Newsday.
Lance Alstodt, chief executive, president and chairman of Melville-based BioRestorative Therapies Inc., received a package valued at $21.34 million at the time of the award. That was a shade higher than the $21.33 million landed by Francisco J. Silva, the 9-person company's vice president of research and development, according to S&P Global Market Intelligence, which gathered and tabulated the data.
Other Long Island executives in the top 10 for 2021 were:
- Ivan Paul Kaufman, chairman, president and CEO of Arbor Realty Trust Inc., $13.4 million;
- Stanley M. Bergman, executive chairman and CEO of Henry Schein Inc., $10.8 million;
- Conor C. Flynn, CEO and director, Kimco Realty Corp., $10.5 million;
- Timothy C. Gokey, CEO and director, Broadridge Financial Solutions Inc., $10.3 million;
- Dan Bodner, CEO and chairman, Verint Systems Inc., $10 million;
- Kevin M. O'Connor, CEO and director, Dime Community Bancshares Inc., $9.7 million;
- Thomas Robert Cangemi, president, CEO and chairman, New York Community Bancorp Inc., $8.7 million,
- and James Francis "Jim" McCann, founder and executive chairman, 1-800-Flowers.com Inc., $7.7 million.
Nationwide, executive pay at the largest U.S. companies climbed sharply in 2021. A study by data provider Equilar found that median CEO pay for the top 100 public companies by revenue reached $20 million, a 30.8% increase versus 2020. The highest earning Fortune 500 executives were: Elon Musk, CEO of Tesla; Tim Cook, CEO of Apple, and Jensen Huang, CEO of Nvidia, all with compensation of more than half a billion dollars.
Lauren Peek, a principal at Manhattan-based consultancy Compensation Advisory Partners LLC, said the initial outbreak of COVID-19 put a lid on pay packages.
She said 2020 "was a rough year for companies that had to make difficult choices related to the pandemic. In 2021, payouts bounced back."
The compensation for all 221 executives listed in 2021 by Long Island's public companies — only three of which, Henry Schein, Kimco Realty and Broadridge Financial, are large enough to qualify for the S&P 500 — totaled $397.1 million, with a median compensation of $980,000.
A million-dollar field goal
Alstodt, who in 1997 as a 26-year-old investment banker pocketed $1 million by kicking a 35-yard field goal in a contest sponsored by candymaker Hershey's at the NFL's Pro Bowl in Honolulu, said his $21.3 million pay package is deceiving because it is far from certain if he will ever receive the full amount.
His base salary is $275,000, according to the S&P data, but performance incentives raised that by $150,000 in November 2021. The employment agreement called for him to receive almost $7 million in restricted stock awards that began vesting in three annual installments in March.
But the largest component of Alstodt's compensation — valued at $14 million when they were granted — is in stock options. These options give him the chance to buy the company's stock at a discount in the future. Option contracts include a "strike" price that the stock must reach to allow the options to be exercised. Granting options with a strike price above the current market price is intended to incentivize executives to drive the stock price higher.
In the case of BioRestorative, the stock has tumbled.
"None of my options are in the money," Alstodt said.
In 2020, BioRestorative Therapies, which moved to Melville from Jupiter, Florida in 2015, emerged from bankruptcy and Alstodt was promoted from executive vice president and chief strategy officer to CEO. In March 2021, the company's new board of directors awarded Alstodt a pay package, including the options to purchase 293,479 shares of common stock. Those 10-year options had a strike price set at $47.60 — meaning they can be exercised if the stock reaches $47.60 a share, accounting for the $14 million valuation.
As the company's share price fell, however, the board of directors reduced the exercise price, first to $13.50 per share and later, subject to stockholder approval, to $5.08. The ultimate value of the 10-year options will hinge on fluctuations in the stock price and any further changes in the exercise price.
BioRestorative stock, whose 52-week high was $34.40, reflecting a 1-for-4,000 reverse stock split in October, closed Friday at $3.60. That gave the entire company a market capitalization — the combined value of all of its shares — of about $13.1 million.
In the quarter ended March 31, BioRestorative, whose $250,000 federal Paycheck Protection Program loan was forgiven, booked revenue of $16,000.
The company is planning to roll out a Phase 2 clinical trial of its lead cell therapy candidate, BRTX-100, which uses stem cells from the patient's bone marrow to treat chronic lumbar disc disease. It also is seeking to develop a therapy to target obesity and metabolic disorders using stem cells.
Robert B. Catell, the former chairman and CEO of KeySpan Corp., resigned as a BioRestorative director in November 2020 as the company went through bankruptcy. He said that BRTX-100 is promising, but the previous management had been unable to raise the $20 million required to run clinical trials and apply for Food and Drug Administration approval.
Mitchell Goldberg, president of Melville wealth management firm ClientFirst Strategy Inc., said that in general, investors should pay heed to issues of executive compensation.
In some cases, he said, top executives can install compliant directors to the board, which controls executive compensation.
"They have to put in their own guys so the board will vote for compensation," he said. "Ultimately, [for investors] it's a buyer beware situation."
Henry Schein shareholders push back
In an effort to align executive compensation with shareholder interests, the SEC in 2011 adopted "say-on-pay" rules as part of broader Dodd-Frank Wall Street reform legislation. The regulations mandate non-binding advisory votes at least every three years by shareholders on executive compensation.
Historically, shareholders typically approve pay packages with an 80% or 90% majority, said Anoop Rai, a professor of finance at Hofstra University.
But shareholders increasingly are willing to register dissent.
This year, shareholder majorities voted against a pay package worth as much as $178.6 million for Intel Corp. CEO Pat Gelsinger and a $52.6 million retention bonus for JPMorgan Chase & Co. CEO Jamie Dimon.
On Long Island, shareholders of Henry Schein, the region's largest public company by revenue, came within a whisker — 61.1 million in favor versus 57.5 million opposed — of rejecting the pay packages of the top executives of the dental-products distributor.
"It's not binding, but the fact is, it sends a strong message," Rai said of the vote.
Proxy advisory firm Institutional Shareholder Services had recommended a no vote on the Henry Schein compensation proposal, which included an increase in time-based (as opposed to performance-based) compensation and a 73% overall compensation increase from $6.2 million in 2020 for CEO Stanley Bergman.
Time-based compensation is awarded to an executive simply for serving in a role over a set period, while performance-based compensation requires specified goals to be reached.
Rosanna Landis Weaver, an executive compensation analyst at shareholder advocacy non-profit As You Sow, said that time-based compensation "completely disconnects pay and performance."
In addition, generous severance benefits might have "tipped the scales" in persuading some shareholders to cast no votes, she said.
A year earlier, Henry Schein shareholders had overwhelmingly approved the executive compensation package with 91.1% of the vote.
“We believe in, and will continue to focus on, aligning executive compensation with long-term shareholder value creation," Henry Schein said in a company statement. "Our board will carefully consider the input we received from our shareholders in connection with this year’s annual meeting. We will continue to engage with shareholders as we develop our executive compensation plans.”
Broadridge has highest median pay ratio
Another mandate of the Dodd-Frank law requires larger public companies to calculate the ratio between CEO compensation and the pay of a median employee.
Among the 20 Long Island companies required to report that metric, Broadridge Financial posted the highest ratio, with the CEO's salary of $10.3 million being 150 times the median worker's $68,487.
"The mix of compensation elements for our CEO is heavily weighted (90%) towards variable, performance-based compensation with the remaining amount of our CEO’s compensation (10%) being base salary," a Broadridge Financial spokesman said in a statement. "In addition, we received a vote of 93% of our shareholders in favor of our executive compensation practices at last year’s annual meeting."
The company with the second highest ratio was Uniondale-based Arbor Realty Trust Inc., whose top executive, Ivan Paul Kaufman, had total compensation of $13.4 million, 138 times the median worker's compensation of $97,246.
Hofstra's Rai said that the gap between top executives and workers is far smaller in other developed countries, including Germany, where public companies have two-tier boards that include representation by workers.
Awarding outlandish executive compensation "becomes embarrassing when you have the union leaders at the same table," he said.
In April, French President Emmanuel Macron decried a 19.15 million euro ($19.9 million) compensation package to the CEO of automaker Stellantis as "shocking," "excessive," and "astronomical."
Stellantis was formed in 2021 by the merger of PSA Peugeot and Fiat Chrysler.
A 2017 study by the National Bureau of Economic Research found that the average pay ratio of CEO-to-typical-worker in the S&P 500 was 40 times in 1980 compared to 335 times in 2015.
Executive compensation: What's inside
Base salary: This is the basic paycheck familiar to all wage earners.
Bonuses: Annual incentives for reaching pre-determined milestones. These are typically cash payments. Payouts might be based on a company's earnings per share or other measures.
Restricted stock awards: These are long-term awards in the form of shares awarded with future vesting dates that determine when an employee has full ownership. These are often linked to corporate metrics like stock valuation.
Option awards: Options are contracts to buy or sell stock at a specified price within a specified time frame. Options with a "strike price" above the shares' current market price are awarded to encourage executives to increase shareholder value.
Non-equity incentives, pensions and all other compensation: These can include health benefits at retirement and the use of a corporate jet.