Justifying Big Pay For Company CEOs

CEOWhen deciding how much to pay their senior executives, the directors at Jarden Corp.?the owner of brands including Yankee Candle, Rawlings sports equipment, and Bicycle playing cards?use what might seem to be an unlikely measuring stick: the top managers at Oracle Corp., the world?s largest data-base maker.

Oracle is one o 14 companies Jarden identified in 2011 as a ?peer?to help it gauge the going rate for executive pay?a common practice among boards when setting compensation for top managers. The idea is to survey businesses of similar type and size. In reality, it’s not uncommon for companies to pick peers that are larger than themselves. Big jumps in executive pay sometimes follow.

Seven of the peer companies that Jarden disclosed in its most-recent proxy filing?including Oracle, eBay Inc., and Adobe Systems Inc.?had more than twice its market value at their 2014 fiscal year ends. Three of the peers posted more than twice its revenue. That exceeds what many compensation consultants consider the upper threshold for peer size.

From 2011 to 2014, the combined compensation for Jarden’s Chief Executive Officer James Lillie, Vice Chairman Ian Ashken, and Executive Chairman Martin Franklin increased more than sevenfold to $223.9 million, according to the Bloomberg Pay Index, a daily ranking of the highest-paid U.S. executives, which values pay as of a company’s fiscal year end. The compensation includes salary, bonuses, perks, and equity awards.

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