Caterpillar Inc.
Summary:
Overall, the executive compensation program for Caterpillar looks well balanced and aligned with the interests of shareholders. It's even easy to read about and understand everything in their proxy statement given to shareholders. Not much to say besides "job well done". Easy grade here.
Analysis:
The machinery industry, much like a lot of other industries, has been suffering due to the weak economy. The companies who are well diversified internationally are having the most success within this industry. These companies don't have to rely as much on the booms and busts of the U.S. economy. With 56% of sales coming from abroad, Caterpillar is one of these companies.
In spite of being hurt by the domestic economy, and more and more the western European slow-down, Caterpillar has still been able to grow. Much of this is also due to a few key managerial decisions including: a focus on developing countries, raising the R&D budget, expanding and shifting manufacturing and distribution operations, and ramping process improvement efforts. Management has done a very good job preparing for the woes of the domestic economy and they continue to make strides in a positive direction.
Considering a moderate financial performance and strong personal performance, we would expect the Caterpillar execs to be making an above average wage.
So… What Are They Paid?
We'll make this one easy on you… it looks fantastic! Salaries and bonuses (including non-equity incentives) are about average. Stock awards are very low (under one million for the CEO and an average of $250,000 for the NEOs). Options are a little higher than usual, but they don't appear to be extreme.
Perquisites are very good. The company doesn't give out any perks for personal car or plane usage, which is very refreshing to see. The one problem area is the high amount given out for the company's matching program ($170,000 to the CEO), but again, this program is within reason.
The termination and change in control clauses also look very good. Upon resigning, the CEO would receive his deferred compensation, a small amount of $3.4 million, and not much else. Following a termination due to change in control, the CEO would receive a paltry $16.7 million, with a capped maximum of $4 million in short-term incentives.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,512,504 | $694,778 |
| Bonus | $300,000 | $95,324 |
| Stock | $918,626 | $243,249 |
| Options | $7,136,911 | $2,427,802 |
| non-Equity Incentives | $4,442,998 | $1,551,713 |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report