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Report: Pay gap between top LI execs and workers widens

Richard J. Daly, executive chairman of Broadridge Financial

Richard J. Daly, executive chairman of Broadridge Financial Solutions, is the Island's highest paid public company executive. Credit: Howard Simmons

Total compensation for Long Island's top executives reached more than a quarter billion dollars in fiscal 2018 as percentage growth in management compensation outstripped that of the broader workforce, according to new data on the region's public companies.

Annual compensation for 212 top executives listed by 56 Long Island public companies  totaled $280.7 million, according to data provided to Newsday by S&P Global Market Intelligence.

Among the 194 executives listed by their companies in both fiscal 2018 and 2017, pay — including salary, bonuses, pensions, stock and options — increased 6.6 percent in 2018.

Meanwhile, the average private-sector wage on Long Island rose about 1.8 percent. Inflation in the New York metropolitan area rose 1.9 percent. 

 The executives' average annual compensation increased to $1.35 million in fiscal 2018, up from $1.26 million in fiscal 2017.

Median pay — the mid-point of the listed salaries — was $716,426, based on compensation data available as of May 31.

Long Island's top-earning public company executive was Richard J. Daly, executive chairman and former chief executive of Broadridge Financial Solutions Inc., a Lake Success provider of back-office services to Wall Street. 

Daly's $11.2 million compensation package, up from $9.2 million the previous year, dethroned last year's top earner, Ivan Kaufman, chairman and CEO of Arbor Realty Trust Inc., a Uniondale real estate investment trust and lender.

Kaufman's $10.7 million pay package for fiscal 2018 put him in second place.

Rounding out the top 10 most highly compensated Long Island executives in fiscal 2018 were: Bruce Schanzer, president and CEO of Cedar Realty Trust Inc., $10.6 million; Dan Bodner, CEO  of Verint Systems Inc., $8.8 million; Irwin Simon, founder and former chairman of The Hain Celestial Group Inc., $7.5 million; Stanley M. Bergman, chairman and CEO of Henry Schein Inc., $6.5 million; Karen Prange, former executive vice president of Henry Schein, $6.5 million; Conor C. Flynn, CEO of Kimco Realty Corp., $5.7 million; Salvatore J. Guccione, former president and CEO of Aceto Corp., $4.9 million, and Joseph R. Ficalora, president and CEO of New York Community Bancorp. Inc., $4.6 million.

Newsday's list excluded executives of several of the smallest public companies as well as officials of Long Island municipalities, nonprofit organizations and private companies.

On the nonprofit side, Michael J. Dowling, president and CEO of Northwell Health, the New Hyde Park health care system  and New York State's largest private employer, made $4.1 million in 2017, based on Northwell's most recently available tax return.

In 2018, Cedar Realty's Schanzer got the biggest raise among the Long Island public company executives, $9,167,542, based primarily on stock awards worth $9 million, after receiving fiscal 2017 compensation of $1,469,388.

Salary alone for the complete list of LI public company executives totaled $90.6 million in fiscal 2018 — an average of $421,280 each — accounting for less than one-third of overall compensation.

Daly's compensation, for instance, comprised $923,782 in salary, $3,056,698 in stock awards, $3,174,775 in option awards, $1,926,004 in nonequity incentive plan compensation, $2,062,901 in pension value and $72,335 in other compensation, such as auto leasing.

The most highly compensated female executives on Long Island's public company list, following former Henry Schein executive Prange at No. 7, were:  No. 28, Robin McBride Zeigler, executive vice president and chief operating officer at Cedar Realty Trust with $2.6 million; No. 36, Linda Perneau, president and CEO of Volt Information Sciences Inc., at $2.1 million; No. 60, Denise Faltischek, executive vice president and chief strategy officer at Hain Celestial, $1.3 million;, and No. 70, Maria A Grasso, senior executive vice president and chief operating officer at Flushing Financial Corp., $1.1 million.

Long Islanders who worked in the private sector earned average wages of $58,528 in 2018, according to state Department of Labor statistics.

Janet Lenaghan, dean of Hofstra University's Zarb School of Business, said that competition for scarce executive talent is driving compensation higher.

"The bottom line is the market sets the salary," she said. "Therein lies the rub. If the salaries keep ratcheting up ... what's going to stop it?"

She cited legendary investor Warren Buffett, who has characterized corporate compensation as a system of reciprocal back scratching.

In many cases, Buffett said, a company's human resources director is called on to recommend a consultant to the board of directors' compensation committee.

The HR director, whose compensation is controlled by the CEO, will be predisposed to recommend a compensation consultant who is likely to propose a generous pay package.

The consultant, meanwhile, sees a better chance of getting repeat business if it offers a healthy pay package, according to Buffett.

J. Richard Finlay, CEO and founder of the Centre for Corporate & Public Governance, a Toronto think tank that seeks to improve boardroom practices, said the compensation process is suspect.  "CEO pay systems are purposely designed to justify high awards," he said. "They never answer: 'Why is so much really necessary?' If Bob Iger, who collected $65 million as CEO of Disney in 2018, were paid half that amount, would he just sit at his desk all day eating cheese sandwiches?" 

On the flip side, paying executives with stock and stock options — typically large parts of their compensation packages — keeps top executives aligned with shareholders, said Craig Ferrantino, president of Craig James Financial Services LLC, a Melville investment firm.

Further, some critics don't appreciate the responsibilities of CEOs, who oversee their company's operations as well as jobs, health care benefits, regulatory issues and myriad other matters, he said of questions about high compensation.

“There’s an argument to be made that you’re employing thousands of people in the U.S. and you’re helping pension funds and other people investing in the company,” Ferrantino said.

A study by the Economic Policy Institute, a nonprofit Washington think tank, found that the average CEO of the top 350 U.S. companies in 2017 received compensation of $18.9 million based on stock options realized, salary and other payouts.

That was a 17.6 percent increase over 2016, the study said, while workers' pay  remained virtually flat.

The study proposed several remedies, including levying taxes on compensation over a specified cap and giving shareholders greater power through "say on pay" proxy votes, which now are merely advisory.

Shareholders rarely vote against executive pay packages, but earlier this month a proposal by Los Gatos, California, streaming service Netflix to pay about $30 million each to CEO Reed Hastings and chief content officer Ted Sarandos was defeated in an advisory vote.

On Long Island, the compensation of Bodner, the Verint CEO, was one of several issues raised in a proxy battle with Manhattan-based investment firm Neuberger Berman Investment Advisers LLC. 

Melville-based Verint provides hardware and software for corporate call centers and government intelligence and law enforcement agencies.

Earlier this month, the companies announced a resolution of the dispute, and Neuberger Berman agreed to withdraw its three-person slate challenging incumbents on Verint's board of directors. 

Verint, in a government filing in April, said that under its compensation policy a “significant majority” of executives’ direct compensation is “at-risk or is paid in equity,” whose value depends on the company's stock price.

The Securities and Exchange Commission requires companies to disclose how their   "compensation policies and decisions have taken into account the results of the most recent say-on-pay vote."

Smaller reporting companies, generally defined by the SEC as those with under $100 million in revenue and a public stock float of less than $700 million, have been granted temporary exemptions from say-on-pay requirements. Public stock float is the amount of stock in the hands of institutional and private investors, but not governments, company executives or controlling-interest investors.

Many of Long Island's public companies qualify as smaller reporting companies.

An exemption also was granted to emerging growth companies, which are defined as having annual revenue of under $1.07 billion in the first five years after their initial public offering.

Another measure of executive compensation the SEC now focuses on is the ratio between the pay of the top executive and that of the median employee.

For example, Daly's compensation was 171 times larger than the $65,624 earned by the median employee at Broadridge. 

The SEC requires large public companies to report pay ratio data; two dozen LI companies fall under the mandate. Smaller companies and those classified as emerging growth companies are exempt. 

Ani Huang, president of the Washington-based Center on Executive Compensation, said that pay ratio data can present problems when looking across companies.

"It's difficult to compare [the ratios] between companies," she said.

For instance, among Long Island companies, Eric Gatoff, the CEO and a director of hot dog maker Nathan's Famous Inc., earns 64.3 times the median pay of employees — a relatively low $18,111. In contrast, Jeffrey Alan Gould, president and CEO of BRT Apartments Corp., earns 4.3 times the median salary of the Great Neck REIT's workforce — $291,376.

"It's just a totally different business," Huang said.

Among executives nationwide, the top earner was Tesla Inc. CEO Elon Musk at $513.3 million, according to the Bloomberg Pay Index, which tracks companies that submit compensation details to U.S. regulators. Musk's windfall came solely from stock options.

He was followed by Brendan Kennedy, CEO and president of marijuana processor Tilray Inc., at $256 million; Robert A. Iger, CEO and chairman of Walt Disney Co., at $146.6 million (a figure that includes a special stock grant); Tim Cook, CEO of Apple Inc., $141.7 million; Nikesh Arora, CEO and chairman of Palo Alto Networks Inc., $130.7 million; David M. Zaslow, president and CEO at Discovery Inc., at $122.1 million; James Heppelmann, CEO and president of PTC Inc., $71.5 million; Stephen Schwarzman, CEO and chairman of Blackstone Group LP, $69.1 million; Tony James, executive vice chairman of Blackstone, $66.2 million; and Stephen Angel, CEO of Linde PLC, $66.2 million.

The 2018 Long Island executive compensation data included  figures on NRC Group Holdings Corp., an environmental cleanup company that has since moved its headquarters from Great River to Houston, according to government filings in April.

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