CEO Compensation: Battle Of The Sexes

By Will Ashworth | October 07, 2009 AAA

On September 23, Forbes online came out with an article about America's top-paid female CEOs. It refers to the Lily Ledbetter Fair Pay Act, which guarantees that the wages of men and women are equal. It goes on to say the average female CEO makes $3.9 million, one-third the average of male CEOs. Intrigued, I thought I'd look at some comparisons between the two sexes, trying where possible to match companies of equal size in terms of the type of business, revenues and profits.
Andrea Jung ($11.8M) Vs. William R Johnson ($11.05M)
Jung, the leader of cosmetics giant Avon Products (NYSE:AVP), tops the list of highest-paid female CEOs in America. The comparison with the CEO of HJ Heinz (NYSE:HNZ) is by far the closest call. With pay packages almost identical - over five years Jung earned $44.08 million to Johnson's $40.79 million - it's hard to decide the winning CEO. In terms of pay-for-performance, Jung delivered an EBITDA margin in the latest twelve-month period of 13.1%, 440 basis points less than William Johnson. With revenues only $60 million apart, we'll go to a tiebreaker. Unfortunately, both stocks over the past 52-weeks are down an equal amount. Therefore, the performance award goes to Heinz and its higher margin. (For more on EBITDA, see EBITDA:Challenging The Calculation.)

Carol Meyrowitz ($11.1M) Vs. Myron Ullman III ($5.39M)
This should be an easy decision if the numbers are anywhere close. Meyrowitz's discounter TJX (NYSE:TJX) has an EBITDA margin of 10.4%, while department store JC Penney's (NYSE:JCP) is 7.3%. Given TJX is a discounter combined with a return on assets 968 basis points higher than Penney's, I'd say Meyrowitz is worth every penny.

Indra Nooyi ($9.4M) Vs. Muhtar Kent ($6.35M)
Indra Nooyi's been CEO of Pepsi (NYSE:PEP) for almost three years now and is still revered by the world business press. Financial Times just named her the number one businesswoman in the world. One would think that she's worth her weight in gold one would think. Pepsi's EBITDA margin is 21.2%; Coke's (NYSE:KO) is 31.1%. That's a KO for sure, only not for Ms. Nooyi. Kent gets the job done for one-third less. To erase any doubts, whose stock has done better YTD? Coke is up 20% to Pepsi's 11%. Coke is it.

Susan Ivey ($9.4M) Vs. Harold McGraw III ($4.35M)
This is an example of good versus evil. Ms. Ivey is CEO of cigarette maker Reynolds American (NYSE:RAI) while McGraw is head of information conglomerate McGraw-Hill (NYSE:MHP). In terms of profitability, nothing makes more money than selling cancer sticks. Reynolds EBITDA margin is 31.8%, 700 basis points higher than McGraw-Hill. McGraw-Hill's EBITDA is 117% of total debt while Reynolds is 61.6%.

Tamara Lundgren ($6.6M) Vs. Keith Busse ($4.30M)
In terms of EBITDA margins, Busse's Steel Dynamics (Nasdaq:STLD) is 150 basis points higher than Schnitzer Steel Industries (Nasdaq:SCHN). However, Schnitzer's stock is up 40% year-to-date to 34% for Steel Dynamics. That by itself isn't a winning argument. In my opinion, Steel Dynamics' Achilles' heal is its total debt, which is 17 times Schnitzer's. It's for this reason I give the CEO award to Tamara Lundgren.

Bottom Line
It's really a toss-up when we get down to it. Looking at this very small sampling of companies, it seems like female CEOs are being appropriately compensated, but looking at five companies doesn't really give a complete picture. As well, outright compensation is not the bottom line for most CEOs; to get a complete story, we should also look at stock options, bonuses and benefits. Though female CEOs do get less compensation on average, looking at this group, it seems that at least some are being paid fairly, and sometimes more than comparable male CEOs. (For additional reading, check out Reigning In CEO Rewards and Lifting The Lid On CEO Compensation.)

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