Mixed financial results influenced compensation in fiscal 2013 (FY13) as just over half of the top executives in IBO’s Stock Indexes recorded higher pay, according to IBO’s latest review of US instrument and lab product companies’ executive compensation. For the 34 CEOs and/or presidents from the 32 companies in the Indexes who have served in their respective roles for more than one year (excluding Pall President and CEO Lawrence Kingsley), average total compensation increased 3.0% to $4.8 million in FY13. The profusion of wealth was again primarily attributable to higher-value long-term equity awards, which on average climbed 6.8% to $3.1 million to account for 64% of total compensation. Conversely, average annual cash incentives declined 8.6% to $727,148 to make up 15% of total pay. Average base salary grew 4.6% to $704,793 to also account for 15% of compensation.

As customary, a number of top executives received sizable compensation for attaining financial measures, achieving individual performance objectives and growing shareholder value. In FY13, six executives received total compensation of more than $10 million, led by Roper Industries President and CEO Brian D. Jellison, whose total pay climbed 18.2% to $21.4 million. Roughly 94% of the Mr. Jellison’s compensation was performance based, including a cash bonus of $2.6 million and performance-based restricted stock valued at $17.3 million. A similar number of shares has been granted to him over the last three years and, thus, the rise in his long-term compensation was driven by the stock’s appreciation, which has increased 81.3% over the same period.

Despite a 10% decline in FY13, total compensation for Danaher President and CEO H. Lawrence Culp, Jr. amounted to $19.7 million, including stock awards valued at $13.6 million. Among his performance measures, Mr. Culp was rewarded for the continued integration of Beckman Coulter (see IBO 2/15/11) and strong shareholder returns. Similarly, Thermo Fisher Scientific President and CEO Mark N. Casper was incentivized for the acquisition of Life Technologies (see IBO 4/15/13). In FY13, his total compensation climbed 17.0% to $16.2 million, including a maximum bonus of $3.9 million and a combination of stock awards valued at $10.6 million.

Mr. Kingsley, who was excluded from the calculation of averages above due to payments related to his hiring in FY12, amassed total compensation of $11.3 million in FY13. However, given his lofty equity awards in the previous year, total compensation fell 66.6%, which was one of the largest declines among executives in FY13.

Finally, Sigma-Aldrich President and CEO Rakesh Sachdev, and Agilent Technologies President and CEO William P. Sullivan amassed total compensation of $10.5 million and $10.2 million, respectively, in FY13. Mr. Sachdev’s compensation soared 132.2% to $10.5 million as the company extended his compensation agreement, which included a 12.5% raise in base salary and a one-time equity grant valued at $5.3 million based on retention of services and increased shareholder value over the past several years.

Despite the significant pay increase for Mr. Sachdev, the largest percentage change in total compensation among executives in FY13 was recorded by Cellular Dynamics International CEO Robert J. Palay, whose pay soared 323.4% to $2.1 million. Following the firm’s IPO on June 25, 2013 (see IBO 6/30/13), Mr. Palay received a bonus of $294,000 and stock options worth $1.2 million.

Total compensation for Affymetrix President and CEO Frank Witney, PhD, who recorded the largest decline in total compensation in FY12 due to missed performance measures, jumped 167.7% to $1.8 million in FY13. Dr. Witney received a larger equity grant based primarily on shareholder-return measures and the launch of the Axiom 384 platform.

As with Mr. Jellison and other executives listed above, the persistent bull market over the last five years has impacted the values of stock options and restricted shares that vested or were cashed in FY13. Given the significance of these values, some companies are now using an alternative compensation measure, “realized” pay, to evaluate the relationship between executive pay and company performance. Realized pay, which includes salary, bonus, incentive awards, perks, and gains from vested shares and exercised stock options, calculates the amount that the executive actually reports as taxable income. These calculations vary from the amounts listed in the tables here, which are based on the amounts in the firm’s annual proxy statements as required by the SEC.

Based on realized pay, 12 executives earned more than $10 million each in FY13, including four with pay of more than $20 million. Illumina President and CEO Jay T. Flatley amassed the largest realized-pay value at $34.4 million due to the exercise of 430,000 option shares worth $30.7 million. Mettler-Toledo President and CEO Olivier A. Filliol exercised options valued at $19.1 million for total income of $21.2 million. Despite realized compensation of $23.5 million and $26.9 million for Mr. Jellison and Mr. Culp, respectively, these amounts paled in comparison to the sums earned in FY12, which were valued at $68.8 million and $90.9 million, respectively. From FY11 to FY13, Mr. Jellison and Mr. Culp have accumulated roughly $121 million and $137 million in realized pay, respectively.

However, until all companies provide supplementary-pay disclosure and a standard calculation of realized pay, the intended total compensation figures listed in companies’ proxy filings as required by the SEC will continue to be used to analyze annual compensation.

While the actual values of long-term equity awards remain ambiguous, annual cash-incentive awards are mostly transparent. In FY13, nearly 60% of executives received either lower bonuses or were ineligible for bonuses as a result of missed financial metrics. For example, Sequenom CEO Harry F. Hixson, Jr. and President William Welch failed to achieve the minimum 80% requirement of revenue and cash-burn targets and, therefore, were ineligible for cash incentives. Waters President and CEO Douglas A. Berthiaume was also ineligible for a cash bonus due to missed adjusted EPS and operating-income targets. In addition, Mr. Berthiaume declined to be considered for an option grant, and his base salary was reduced by 5.0% due to the company’s cautious outlook. Nevertheless, Mr. Berthiaume exercised 150,000 options worth $10.2 million that were due to expire at the end of FY13. In total, Mr. Berthiaume realized compensation of $11.1 million, a far cry from his listed salary of $898,974.

Similar to Mr. Berthiaume, other executives recommended self-imposed restrictions on compensation. Michael Hunkapiller, PhD, president and CEO of Pacific Biosciences, voluntarily opted to receive a $1 base salary and waived any incentive bonus in order to preserve company cash. As a result, his total compensation fell 65.8% to $745,421. Veeco Instruments eliminated executive cash incentives for FY13 due to cost-reduction efforts. Consequently, total compensation for President and CEO John R. Peeler declined 16.6% to $2.9 million.

As exemplified by Dr. Hunkapiller, not all executives earned sizable compensation packages in relation to the top earners in FY13. Aside from Dr. Hunkapiller, 12 executives received compensation at the $1 million level or lower. These executives were mostly presidents or CEOs of companies with smaller market capitalizations. Pressure BioScience President and CEO Richard T. Schumacher collected the smallest compensation package at $315,756. MTS Systems President and CEO Jeffrey A. Graves earned $872,302, as the company omitted long-term equity grants due to the timing of the Compensation Committee meeting.

CEO Changes

The retirement of certain executives led to a number of new appointments, including Jeffrey A. Duchemin, who was appointed president and CEO of Harvard Bioscience effective August 26, 2013 (see IBO 8/31/13). Mr. Duchemin was awarded a bonus of $150,000 and stock options valued at $1.1 million as part of his compensation package. Charles R. Kummeth was appointed president and CEO of Techne effective April 1, 2013 (see IBO 6/15/13). Mr. Kummeth received a cash award of $107,813 and equity grants valued at $2.0 million as part of his compensation package. Leo Berlinghieri retired as CEO of MKS Instruments on December 30, 2013. As part of the separation agreement, Mr. Berlinghieri received a bonus of $933,285, $4.0 million based on the value of accelerated unvested restricted-stock units and $698,440 for lifetime health benefits.

Other changes to the compensation tables included the resignation of Chris L. Koliopoulos as president and CEO of Zygo on October 21, 2013. Gretchen W. McClain resigned as president and CEO of Xylem effective September 9, 2013. Ms. McClain received a severance payment of $4.0 million. However, her realized compensation in 2013 was $13.7 million. Paul Kinnon replaced Craig J. Tuttle as president and CEO of Transgenomic on September 30, 2013 (see IBO 11/15/13). Finally, Francis A. deSouza joined Illumina as president on November 11, 2013 (see IBO 11/15/13). He received a signing bonus of $140,000 and equity awards valued at $6.6 million.

Executives of Dedicated Business Units

For the 13 heads of dedicated instrument and lab-related business units with reported salaries for the last two fiscal years (see table, page 7), FY13 total average compensation declined 3.9% to $2.3 million. The decline was caused by a $4.2 million supplementary pension award granted to Pall Life Sciences President Yves Baratelli in FY12. Excluding this one-time payment, average total compensation would have climbed 11.1%, including a 14.6% and 9.0% rise in average cash incentives and average equity awards to $315,114 and $1.3 million, respectively.

Average base salary for the dedicated-unit heads expanded 3.5% to $465,431 in FY13. Eleven of the 13 executives received a higher base salary, while the salary of Thomas Caratsch, head of Laboratory at Mettler-Toledo, was unchanged and the salary for Arthur G. Caputo, executive vice president and president of the Waters’s Waters Division, declined 3.0%. While Mr. Caputo was also the only executive to not receive an annual cash incentive, he was awarded higher equity awards as a retention incentive in light of Mr. Berthiaume’s retirement announcement (see IBO 8/31/13). In addition, Mr. Caputo exercised options valued at $6.7 million that were set to expire in FY13.

The largest change in total compensation among the heads of the dedicated business units was for Bruker Nano Surfaces President Mark Munch, PhD. Mr. Munch received equity grants that elevated his total compensation 184.1% to $1.5 million. In contrast, due to a one-time retention bonus received in FY12, total compensation for Agilent Technologies Chemical Analysis President Michael R. McMullen declined 24.7% to $2.9 million.

There were a number of management changes at Agilent following the Life Sciences and Diagnostics Group realignment (see IBO 9/30/13), including the departure of Life Sciences President Nicolas Roelofs on October 31, 2013. Other departures in FY13 included E. Kevin Hrusovsky, who stepped down as senior vice president and president of Life Sciences and Technology at PerkinElmer, effective May 31, 2013 (see IBO 7/15/13). Eric M. Green was appointed executive vice president and president of Sigma-Aldrich Research Markets, effective January 1, 2013.