In fiscal 2008, average short-term and long-term compensation for 56 executives at 44 analytical instrument and laboratory product companies in IBO’s three Stock Indexes (see IBO 4/30/09) increased, according to the latest results of IBO’s annual Executive Compensation Survey. Average total short-term compensation grew 5.1% to $1,199,310, while average total long-term compensation rose 13.2% to $2,599,601. Total average compensation grew 11.1% to $3,677,379.

However, not all executives completely benefited. Although most executives’ short-term salaries continued to grow, despite a faltering economy and declining sales growth, the average long-term compensation package was adversely affected by declining stock prices. Long-term compensation includes fair-value stock awards (company stock granted at a specified price) and fair-value option awards (an option to buy company stock at a specified price). The fair value of equity awards are based on the day that the grant is awarded. For most companies, these awards occurred during the first half of the year before the severe stock market correction.

For companies that granted options prior to the mid-point of 2008, the average equity award was roughly 30% below the exercise price, based on the closing prices on May 15, 2008. Thus, these executives will have to either wait patiently for a market recovery to profit from their options, or will have to seek to revalue the worthless stock options via shareholder approval. For example, multimillion dollar long-term stock and option awards for Thermo Fisher Scientific President and CEO Marijin E. Dekkers, PhD, and Executive Vice President Mark N. Casper are now 36% below the exercise price, based on the closing stock price on May 15, 2008.

For executives fortunate enough to have been granted shares in November and December 2008, the average share price was 24% above the exercise price based on closing market prices on May 15, 2008. The lucky few were executives at Life Technologies, Mocon, Symyx Technologies and Waters, Harvard Biosciences.

The Compensation Survey consists of short-term compensation (salary, bonuses and nonequity incentives) and long-term compensation (fair-value stock and option awards and changes in pension value and nonqualified deferred compensation). To calculate total compensation, IBO includes short- and long-term compensation, as well as other compensation (e.g., contributions to qualified retirement plans and perquisites over $10,000). The compensation tables also include the money from stock options exercised by executives in fiscal 2008. All figures in the tables are based on fiscal-year results. All calculated averages include only those executives who received payments.

The increase in average total short-term compensation in fiscal 2008 included a 9.9% average increase in base salary to $578,905, as well as a 24.8% increase in average bonus and nonequity incentives to $827,207. This increase is primarily attributed to fewer awards by smaller firms, which increased the average. In fact, this year, 14 executives did not receive bonuses or nonequity incentives, compared to 4 executives last year, on account of missing performance requirements. The median total short-term compensation grew 4.0% to $505,886, including a 16.7% increase in median base salary to $868,526 and a 26.9% increase in median incentive award to $827,207.

Despite lower revenue growth, most executive were able to achieve performance measures to ensure some sort of bonus compensation. For example, Beckman Coulter’s compensation committee changed two performance measures: including inventory instead of consumables revenue, and increasing the weighting for revenue growth. However, other firms, such as Cepheid, Affymetrix, X-Rite, Symyx Technologies and Harvard Bioscience, did not alter their performance objectives and, as a result, did not provide short-term incentives to their executives.

Excluding a payout of $32.8 million to Roper Industries President and CEO Brian D. Jellison in 2008 and a $29.0 million payment to Life Technologies Chairman and CEO Gregory T. Lucier in 2007 (see IBO 5/15/08), total average long-term compensation in fiscal 2008 for the executives in the tables grew 14.7% to $1.9 million. However, median total long-term compensation declined 12.8% to $990,111 million. Only five executives did not receive some form of long-term stock or option compensation in fiscal 2008, compared to six last year.

Approximately 32% of executives received nonqualified deferred compensation or recorded a change in pension value in fiscal 2008, compared to 40% last year. For those who received payments, average compensation rose 33.2% to $291,650. The large increase is due to a $2.1 million payment to Pall CEO Eric Krasnoff. The average Other compensation declined 5.8% to $74,928. Lawrence Culp, Jr., president and CEO of Danaher, received the largest Other compensation, valued at $580,225, including perquisites.

Average total compensation declined 0.4% to $1.8 million. Mr. Jellison led all executives due to a $32.8 million multiyear stock and option award. Mr. Lucier and Dr. Dekkers’s total compensation also exceeded $10 million. According to The Corporate Library, in 2008, average total compensation for the CEO of a Standard & Poor 500 company was $10.4 million.

Laboratory Instruments Index

The Laboratory Instruments Index consists of 29 executives from 22 companies. Average fiscal 2008 short-term compensation declined 0.4%, despite an 8.2% increase in average base salary. Frank H. Laukien, PhD, president and CEO of Bruker, had the largest increase in base salary and incentive awards, which climbed 38.7% and 102.1%, respectively. The company’s compensation committee sought to raise his short-term compensation to a more competitive level relative to his peer group. The average bonus and nonequity incentive for the Index jumped 30.7%. Nineteen executives received annual incentives compared to 27 in 2007, as 10 companies did not award any incentive payments. The median total short-term compensation fell 10.9% to $1,083,058, while the median base salary and incentive compensation rose 13.3% and 25.7% to $491,346 and $604,500, respectively.

The total average long-term compensation for the Index climbed 28.5% to $2,325,624, primarily due to a $15.5 million stock option award for Dr. Dekkers. The average total compensation increased 16.6%. Excluding Dr. Dekkers, the total average compensation declined 1.9% to $2.7 million, while the average long-term payout slipped 2.8% to $1.8 million. Including all executives, this Index’s median long-term compensation improved 33.4% to $1.2 million, while median total compensation declined 1.7% to $1.8 million.

There were several changes to the executives in the Index. Stanley N. Lapidus resigned as CEO of Helicos Bioscience in August 2008, but remained chairman, and Ronald A. Lowy became CEO in December 2008. In February, Robert F. Friel, vice chairman and president of the Life and Analytical Sciences for PerkinElmer, was appointed president and CEO. Mr. Friel received a 34.8% increase in his base salary.

Process/Metrology/Motion Instrumentation Index

The Process/Metrology/Motion Instrumentation Index consists of nine executives from eight companies. The average short-term compensation for the Index in fiscal 2008 rose 5.8% and included a 26.7% increase in the average base salary. The average bonus and nonequity incentive declined 3.6%. The median total short-term compensation declined 0.4% to $450,000, but the median base salary grew 15.4% to $374,100.

The total average compensation for the Index fell 38.7% primarily due to reduced long-term compensation. The average stock and option award was $527,502, a decline of 54.9%. The decline was also affected by a 2007 stock award of $3.1 million to John R. Peeler, CEO of Veeco Instruments.

Mr. Peeler received the largest increase in short-term compensation in fiscal 2008, as it jumped 274% to $1.0 million due to his promotion in July 2007. Changes to the Index included the promotion of Francis M. DiNuzzo to president and CEO of Strategic Diagnostics. Mr. DiNuzzo replaced Mr. Knight, who served as president and CEO through June 2008. Laura B. Hamilton was appointed CEO of MTS Systems in January 2008, and was appointed chairman in September 2008.

Laboratory Consumables/Equipment Index

The Laboratory Consumables/Equipment Index includes eight executives from eight companies. The average short-term compensation for executives in this Index improved 13.7% in fiscal 2008, including a 5.9% rise in average base salary, as well as a 17.5% increase in average bonus and nonequity incentives. The median base salary and incentive compensation climbed 14.2% and 21.4% to $800,481 and $533,000, respectively.

The total average compensation for the Index declined 35.5% due to a large equity award for Mr. Lucier in 2007. Excluding it, the average long-term and total average compensation increased 7.3% and 22.3% to $2.5 million and $3.0 million in fiscal 2008, respectively.

Diversified Instrumentation Index

The Diversified Instrumentation Index includes 10 executives from 6 companies. The average short-term compensation grew 6.0%, including a base salary increase of 4.1%. The average bonus and incentive payment climbed 7.1%. The median total short-term compensation rose 7.2% to $1.7 million, but the median base salary grew only 0.8% to $746,165. However, the median short-term incentives rose 46.1% to $1.3 million.

The total average compensation jumped 57.5%, as the average stock and option compensation more than doubled to $5.0 million due to the $32.8 million awarded to Mr. Jellison. The median long-term and total compensation increased 9.7% and 21.3% to $2.6 million and $4.6 million, respectively. The averages represent the largest compensation value among the Indexes. However, these companies also have the highest revenues, as each company has sales of more than $1 billion. The only significant change in positions was the promotion of Olivier A. Filliol to CEO of Mettler-Toledo in January 2008 and the subsequent appointment of Thomas Caratsch as head of laboratory.

Mr. Culp recorded the largest base salary and short-term compensation. For the second consecutive year, Mr. Jellison, had not only the largest total compensation and long-term compensation in the Index, but among all Indexes, amounting to $33.3 million and $29.9 million, respectively. Dr. Dekkers had the largest percentage increase in total long-term compensation, which rose from $225,000 to $15.5 million.

Top 10 Fair-Value Stock and Option Grant Recipients, 2008

Company Executive Fair Value

Roper Industries Brian D. Jellison $29,920,000

Thermo Fisher Scientific Marijin E. Dekkers $15,535,060

Life Technologies Gregory T. Lucier $8,110,922

Thermo Fisher Scientific Mark N. Casper $6,837,585

Becton Dickinson & Co. Edward J. Ludwig $5,021,051

Illumina Jay T. Flatley $4,939,897

Mettler-Toledo Int’l Olivier A. Filliol $4,343,150

Beckman Coulter Scott Garrett $4,021,340

Millipore Martin D. Madaus $3,662,546

Sequenom Harry Stylli $3,575,215

Average $8,596,677

Top 10 Total Compensation, 2008

Company Executive Total Pay

Roper Industries Brian D. Jellison $33,318,262

Thermo Fisher Scientific Marijin E. Dekkers $18,766,492

Life Technologies Gregory T. Lucier $11,203,570

Thermo Fisher Scientific Mark N. Casper $8,448,354

Pall Eric Krasnoff $7,862,429

Becton Dickinson & Co. Edward J. Ludwig $7,621,356

PerkinElmer Robert F. Friel $6,982,619

Illumina Jay T. Flatley $6,219,185

Mettler-Toledo Int’l Olivier A. Filliol $5,907,603

Beckman Coulter Scott Garrett $5,798,277

Average $11,212,815

Top 10 Short-Term Raises, 2008

Company Executive % Chg.

Veeco Instruments John R. Peeler 274%

MTS Systems Laura B. Hamilton 80%

Nanometrics Timothy J. Stultz 80%

Teledyne Technologies Aldo Pichelli 66%

Bruker BioSciences Frank H. Laukien 64%

Agilent Technologies William P. Sullivan 46%

Teledyne Technologies Robert Mehrabian 46%

Illumina Jay T. Flatley 43%

Bio-Rad Laboratories David Schwartz 40%

Pall Eric Krasnoff 30%

Average 77%

Top 10 Short-Term Compensation, 2008

Company Executive Total Pay

Danaher H. Lawrence Culp, Jr. $4,367,250

PerkinElmer Robert F. Friel $3,609,495

Thermo Fisher Scientific Marijin E. Dekkers $3,090,313

Life Technologies Gregory T. Lucier $3,028,404

Teledyne Technologies Robert Mehrabian $3,027,869

Roper Industries Brian D. Jellison $2,920,000

Becton Dickinson & Co. Edward J. Ludwig $2,586,025

Agilent Technologies William P. Sullivan $2,292,230

Pall Eric Krasnoff $2,210,130

Waters Douglas A. Berthiaume $2,205,000

Average $2,933,672

Top 10 Operating Profits in Proportion to Compensation, 2008

Company Executive Op. Prof./Pay*

CEOs

Techne Thomas E. Oland 616

Becton Dickinson & Co. Edward J. Ludwig 600

Sigma-Aldrich Jai. P. Nagarkatti 443

Danaher H. Lawrence Culp, Jr. 428

Thermo Fisher Scientific Marijin E. Dekkers 398

Average 497

Non-CEOs

Thermo Fisher Scientific Mark N. Casper 806

Danaher Thomas P. Joyce, Jr. 741

AMETEK R.W. Chlebek 517

Mettler-Toledo Int’l Thomas Caratsch 344

Waters Arthur G. Caputo 310

Average 544

*Op. Profit earned per dollar of short-term compensation.