Across the board domestic homebuilders are having a tough time. Big, small, high-end, low-end – it doesn't matter. They're all in the tank thanks to higher interest rates, a slowing economy, and a rising cost of living.
But are senior managers at the major homebuilders tightening their belts in response to their shareholders pain?
I did a quick review of some of the recent proxy statements at the major homebuilders just to see if perhaps CEOs were making sacrifices in their pay, particularly since many shareholders have seen their holdings drop by 10% or more (with an emphasis on the "more") over the past 12 to 24 months.
And to tell you the truth I was a bit surprised at what I uncovered.
Check it out
Compensation Tied to Peformance?
Richard Dugas Jr, CEO of Pulte Homes (NYSE: PHM), raked in more then $8 million in compensation this past year when you add up his base salary, and all of the stock options and other perks awarded to him by the board.
Of course, that pay is deserved, right?
In 2005, Pulte earned $5.68 a share, and in 2006 it's earnings dropped to $2.66 a share. Meanwhile its stock price dropped from around the $40 level at the beginning of 2006 to around $30 at the end of the year.
Toll Brothers (NYSE: TOL) is a high-end homebuilder with a heavy presence in the US northeast and has certainly struggled. It's stock has lost more than 10% of it's value over the past year. And (diluted) earnings have declined from $4.78 in 2005 to $4.17 in 2006.
So how did it pay it's chief executive?
Quite well it turns out. Robert Toll brought home a $1.3 million base salary in 2006 and a $17.5 million bonus (yes that's right folks). Not bad, huh?
Beazer Homes (NYSE: BZH), a builder of value and "economy" homes has seen it's stock go from the $70s in late 2005/early 2006 into the $40s in late 2006. Its earnings however, trended upward from $5.87 a share in 2005 to $8.89 a share in 2006.
Not too shabby!
However things aren't looking as hot in 2007. In fact, Wall Street figures the company will post a loss.
So how did it's chief exec get paid?
In 2006, Ian McCarthy earned a base salary of $1.2 million and a bonus of $7.1 million.
In 2006, Hovnanian Enterprises (NYSE: HOV), a single family and condominium homebuilder saw it's stock sink like a stone from right around $50 to the low $30s at the end of the year. The company's annual report referred to 2006 as a challenging year. I venture to say they were right. Earnings went from $7.16 a share in 2005 to $2.14 per share in 2006.
Meanwhile its, chief executive, Ara Hovnanian, pulled down a base salary of just over $1 million, and a bonus of more than $5.8 million.
My Personal Opinion
Don't get wrong folks. This is America where life, liberty, and the pursuit of happiness are considered basic rights. Therefore, I certainly don't begrudge them for bringing home the big bucks. However, there comes a time when I think we all must sacrifice. To that end, if I was a shareholder at any of the aforementioned companies I know that I wouldn't be too happy that my chief executive continued to live high off the hog - particularly while my holdings were taking a beating.
It's important to lure top talent to run these huge companies. After all, there is enormous responsibility that goes along with the job. However, when times are tough it makes good business sense for a company to tighten its belt. And the fact that they are not is, in my mind, just one more reason to stay away from the group.
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