Pay & performance at Herman Miller & Finisar…

August 31, 2011

When we find companies shelling out the big bucks, all too often we check the performance and find it woefully lacking. Sometimes, however, the mismatch isn’t so clear-cut.

Consider two companies: chair-maker extraordinaire Herman Miller (MLHR) and Finisar (FNSR), a networking-equipment maker in Sunnyvale, California (where else?). Both did well by their shareholders last year — and at least as well by their executives — even though the results have, so far, proved fleeting.

Herman Miller’s shares rose about 31% in its fiscal year ended in May, outpacing the S&P 500 by a nice bit. This after improving financial results nicely, though still lagging its performance earlier in the decade. The stock has fallen almost 20% since May, however, trailing the broader market.

But we can imagine Herman Miller executives leaning back oh-so-comfortably in the latest, greatest model — they did better still, at least by the measure of the proxy that the company filed on Tuesday. Together, the five top executives nearly doubled their total compensation, rising 194% to $6.3 million from $3.2 million last year. Chief Executive Brian C. Walker actually brought the average down, but he still made $2.7 million, well over his $1.45 million in fiscal 2010.

Finisar presents a similar picture in many ways. Total pay for all but one of the top five executives rose a tidy 73%, according to the amendment it filed to its 10-K on Monday, which contained pay and governance details. (The pay-hike outlier, Chief Financial Officer Kurt Adzema, saw his total pay rise 68%.) Finisar’s shares rose slightly more, by 79% in the most recent fiscal year (ended in April) — enough to outpace the Nasdaq by more than 60 percentage points. Since then, things haven’t gone as smoothly, with the stock falling just over 30% and trailing the Nasdaq badly.

Finisar kept the pay increase a little more in line with its share gains, though it isn’t clear how much executives have had to absorb the subsequent stock declines at either company (much depends on the magic of valuing options). Here, too, however, Finisar may have the edge, at least from a shareholder’s perspective: More of Herman Miller’s comp came in the form of cash — half to two thirds of it, compared to about a quarter to a third for most of Finisar’s executives.

We’re not purists who think that executive pay should somehow mirror stock swings with no mediation; CEOs are people too, after all, and have to eat and pay the mortgage (however big it might be) even when the stock tumbles. We also appreciate the fact that, at least when it comes to the narrow confines of pay for this year, pay and performance are moving in the same direction at these two companies.

Still, it seems pretty clear to us that one of these companies is matching pay and performance a little more closely than the other.

Image source: Herman Miller website

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