All the kids are above average at Dollar-Thrifty…
And yet, in SEC filings, the surveys we see all seem to arrive in the same place: Corporate executives are either fairly paid or underpaid — compared, naturally, to that ever-variable selection of carefully chosen peer companies. And so it was when we read the 8-K that Dollar-Thrifty Automotive Group (DTG) filed on Thursday.
It turns out both Chief Executive Scott L. Thompson and Chief Financial Officer H. Clifford Buster III were underpaid. Luckily, Dollar-Thrifty had the services of not one, but two compensation consultants to help it set that right:
“Based on the results of an independent compensation study conducted by a compensation consultant engaged by the Company, who worked with the Committee’s compensation consultant, the Committee approved an increase in the base salary of (i) the Chief Executive Officer, Scott L. Thompson, from $550,000 to $800,000 and (ii) the Chief Financial Officer, H. Clifford Buster, III, from $300,000 to $425,000. These increases will become effective on January 1, 2011.”
Crisis averted, thanks to the simple expedient of 45% and 42% raises — after all these guys only made $2.5 million and $1.2 million last year, respectively. But it did lead us to ponder the mysteries of the compensation surveys found in proxies. Everybody goes to great lengths to choose a suitable peer group. All the consultants are independent. No one’s executives seem to land far from the 50th percentile. (Or, if they do, it seems impolite for anyone to actually put it in print).
So we decided to look at a couple of Dollar-Thrifty’s, well, peers, chosen purely by market-cap and industry sector. United Rentals (URI), a construction-equipment rental company of about the same market-cap as Dollar-Thrifty, paid its chief executive just over $600,000 last year — more than Thompson got last year, sure, but less than he’s getting as of next year. Over at direct competitor Avis Budget Group (CAR), Chairman and CEO Ronald Nelson took home $1 million in salary, considerably more than Thompson — but look, they also used a comp consultant, as well as a peer group “as a general check on the reasonableness of such compensation packages.” (And yes, Dollar-Thrifty was in Avis Budget’s peer group. It wasn’t in URI’s — but maybe it will be next year!)
Meantime, last year, Dollar-Thrifty tossed the whole idea of peer-group comparisons out the window, temporarily as it turned out. Why? Here’s how the company explained it in its April proxy:
“Due to the difficult year in 2008 and the challenges facing the Company in 2009 … the Human Resources and Compensation Committee determined that the salaries and target annual bonus opportunities for the named executive officers would not be adjusted. The grant date value of the option awards made in 2009 was significantly less than the value of previous long-term incentive awards due to the decline in DTG’s Share price. Given these factors, no market pay data against which to compare was prepared for, or reviewed by, the Human Resources and Compensation Committee, and the Human Resources and Compensation Committee did not engage in external benchmarking with respect to any element of executive compensation.”
It all reminds us of Lake Wobegon, or maybe the high-school honor roll we wrote about early in our journalism career, where well over half the school’s seniors had made the cut. Surely someone out there must be overpaid — but don’t count on boards or their compensation consultants to mention it.