Comparing the Pay and Performance of Broker Leaders (updated)
DAN REYNOLDS, senior editor of Risk
Of the four largest brokerages surveyed by Risk & Insurance®, the chief of only one of the brokerages, Arthur J. Gallagher & Co., saw his total compensation package decline between 2007 and 2008. According to Gallagher's 2008 proxy statement, President and CEO J. Patrick Gallagher saw his paycheck reduced by 6.37 percent to $2.77 million in 2008, from $2.96 million in 2007.
Company revenue increased to $1.64 billion in 2008, an increase of just 1.35 percent more than the $1.62 billion reported in 2007. An Arthur J. Gallagher spokeswoman declined to comment.
Results and executive compensation reports at the other brokerages, however, throw Patrick Gallagher's compensation and the performance of his company into sharper relief.
Take Willis Group Holdings Ltd., for example. CEO Joseph J. Plumeri received compensation of $9.65 million in 2008, according to Willis proxy statements, a 35 percent increase over his $7.15 million in compensation in 2007. In percentage terms, the increase is more than three times the company's revenue increase of 9.9 percent over the same period.
In 2008, the largest divergence from Plumeri's 2007 compensation package came in the area of option awards. In 2007, he received $958,000 in option awards. In 2008, his compensation in that category was $4.7 million.
Willis HRH President F. Michael Crowley was paid $6.54 million in 2008, and Willis Group President Grahame J. Millwater was paid the equivalent of $3.36 million in British pounds. Crowley's 2008 Willis compensation includes income from his role as CEO of Hilb, Rogal & Hobbs, prior to Willis' acquisition of that company in October.
"Our executive incentive compensation is performance based and is heavily weighted towards long-term performance," said Valerie Di Maria, a New York-based spokeswoman for Willis Group Holdings in an e-mailed response.
"Joe's comp is based on meeting or exceeding targets for EPS and operating margin and is calculated using a specific formula detailed in Joe's contract. Joe's cash compensation was $2.68 million in 2008 versus $4.4 million in 2007--an almost 40 percent decrease. The rest of his '08 compensation is a combination of restricted stock and stock options, which are subject to a multiyear vesting schedule," Di Maria said.
Greg Case, the 46-year-old CEO of Aon Corp., saw his 2008 compensation increase to $12.87 million, up 13.9 percent over his compensation of $11.29 million in 2007. His total package includes stocks, options awards, salary and other compensation.
Aon revenue over the same period rose only 4.24 percent, to $7.36 billion last year, up from $7.06 billion in 2007, according to Aon financial disclosures.
Kelly Drinkwine, a spokeswoman for Aon, said Case, like all other Aon employees, is compensated on a companywide pay-for-performance model.
Brian Duperreault, CEO and president of Marsh & McLennan Cos., was the highest paid among the CEOs of the four major public brokerages, according to the Marsh disclosures. Duperreault made $13.31 million in 2008, or $558,062 more than the $12.75 million awarded his predecessor Michael Cherkasky in 2007, according to financial documents.
Relative to revenue gains, Duperreault's compensation most closely mirrored that of the company that he directs. His 2008 compensation was 4.37 percent higher than Cherkasky's 2007 compensation, while Marsh reported revenues of $11.58 billion in 2008, an increase of 3.66 percent over its $11.17 billion in revenues reported in 2007.
A spokesman for Marsh did not return an e-mail requesting comment.
April 8, 2009
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