Following the 2008 recession and heightened scrutiny over executive rewards, there is little surprise that total executive compensation for the executives in IBO’s annual executive compensation tables declined last year. In fiscal 2009, total average compensation for the 57 executives at 42 analytical instrument and laboratory product companies in IBO’s three Stock Indexes (see IBO 4/30/10) tumbled 18.2% to $3,081,243. However, the median decline was less severe, falling 7.5% to $1,708,729.

Analyzing either measure, the drop in total compensation suggests a trend of declining executive pay and a more proactive alignment of compensation plans with a company’s performance. Based on the tough economic climate and poor financial performance in 2009, a number of companies maintained or reduced salaries, and lowered maximum payout levels for incentive plans.

Changes in performance measures and cost-saving initiatives significantly impacted short-term compensation in fiscal 2009. For the 53 executives with compensation data for fiscal 2009 and 2008, the average short-term compensation declined 15.5% to $994,736, including a 31.6% fall in the average incentive compensation to $420,955. The decline can be attributed to fewer and smaller incentive payouts, which are typically based on company and individual achievements. In fiscal 2009, 12 of the 53 executives did not receive bonuses, compared to 10 in the previous year. Danaher, Waters and OI Corporation missed their minimum threshold for bonuses and consequently executives at these companies received no incentive compensation. Meanwhile, executives for larger and more diversified companies, such as AMETEK, Teledyne Technologies and Mettler-Toledo, realized significantly lower incentive awards, resulting from under-performance of EPS goals.

However, not all executive incentive compensation was distressed by performance measures. John R. Peeler, CEO of Veeco Instruments, enjoyed a 130.7% increase in incentive compensation for meeting EBITA and individual objectives. Acquisitions also contributed to bonus awards. Scott Garrett, president and CEO of Beckman Coulter, received a $150,000 bonus for completing the acquisition of Olympus’s diagnostics business. Frank H. Laukien, president and CEO of Bruker, was rewarded for acquisition-related and cost reduction goals.

Despite several voluntary pay freezes and salary reductions, the average base salary for the 53 executives increased 2.3% to $573,781. In fiscal 2009, 13 of the 53 executives maintained their prior year’s salaries, while eight took pay cuts. The most notable salary reductions were for Dr. Laukien and H. Lawrence Culp, Jr., president and CEO of Danaher, who sustained a 25% and 15% cut in base pay, respectively. Median short-term compensation for all 53 executives declined 13.7% to $735,000, including a 39.1% drop in median incentive compensation to $228,348. Median base salary grew 2.4% to $500,000.

While a short-term compensation trend was evident in fiscal 2009, the trend for long-term compensation was less transparent. The total average long-term compensation for the 53 executives dropped 21.8% to $1,890,240, but median long-term compensation climbed 16.5% to $722,703. The discrepancy is attributed to the extreme variations in long-term compensation, as well as fewer equity awards and the shuffling of CEOs.

In fiscal 2009, nine executives did not receive long-term compensation awards, compared to six in the previous year. Gregory T. Lucier, chairman and CEO of Life Technologies, and Brian D. Jellison, chairman, president and CEO of Roper Industries, did not receive equity compensation following multiyear awards in fiscal 2008. Meanwhile, Marijin E. Dekkers, former president and CEO of Thermo Fisher Scientific, who resigned in September 2009, was ineligible for equity compensation. These three executives combined for $53.6 million in equity awards in fiscal 2008, but zero in 2009.

Nonetheless, this year’s equity awards were not without revelation. Mark N. Casper was granted $32.4 million in long-term compensation following his promotion to president and CEO of Thermo in October 2009. Mr. Casper enjoyed the largest total compensation package and increase of all executives in the tables. Mr. Peeler was granted a $1.6 million discretionary option award to help offset the decrease in value for options he received in 2008.

Laboratory Instruments Index

The compensation table for the Laboratory Instruments Sales Index (see below) consists of 24 executives from 21 companies. Excluding Ronald A. Lowy, CEO of Helicos Bioscience, whose 2008 compensation data was unavailable, the average fiscal 2009 short-term compensation for executives in this Index fell 13.9% to $978,573, including a 29.3% drop in the average incentive compensation to $403,159. Robert F. Friel, president and CEO of PerkinElmer, experienced the sharpest decline in annual incentives. His incentive compensation fell 39.7%, as the company missed EPS targets that were set in 2007 prior to the economic downturn. In spite of the decline, Mr. Friel maintained the Index’s largest incentive award. The average base salary improved 1.5% to $575,414.

The largest increase in short-term compensation, 133.5%, was for E. Kevin Hrusovsky, president and CEO of Caliper Life Sciences. Affymetrix President and CEO Kevin M. King recorded the largest increase in salary, which climbed 41.6% following his promotion to CEO in February 2009.

The average long-term compensation for the Index was down only 0.4% in fiscal 2009 to $2,626,960. In general, there was extreme divergence in equity compensation among executives due to performance measures, changes in position and company size. Consequently, the median total compensation declined 53.9% to $766,560. The average total compensation grew 3.1% to $3,971,736.

Aside from Thermo and Affymetrix, there were several other executive changes. Mark J. Emkjer, former president and CEO of Accelrys, was terminated in January 2009. Vincent A. Forlenza was named president of Becton Dickinson in January 2009, resulting in a 15.6% base salary increase. Lukas Braunschweiler, former president and CEO of Dionex, resigned in May 2009.

Process/Metrology/Motion Instrumentation Index

The Process/Metrology/Motion Instrumentation Sales Index table (see page 5) consists of eight executives from eight companies. The average short-term compensation for these executives grew 3.3% in fiscal 2009 to $581,171, including an 8.0% increase in average base salary. The average incentive award declined 7.9%. The total average compensation jumped 30.5% due to a 5.1% increase in long-term compensation. The only change in the Index was Colin J. Cumming, who was promoted to president and CEO of ICx Technologies in April 2009.

Laboratory Consumables/Equipment Index

The Laboratory Consumables/Equipment Sales Index table (see page 5) consists of seven executives from seven companies. In fiscal 2009, the average short-term compensation for executives in this Index climbed 12.5%, including a rise of 21.1% in average bonus and nonequity incentives. The average base salary improved 4.1%. The total average compensation declined 28.1% due to a large equity award for Mr. Lucier in fiscal 2008. Excluding that award, the average long-term compensation improved 5.0% to $773,593, and the total average compensation slipped 2.6% to $2,250,311, respectively.

Diversified Instrumentation Index

The Diversified Instrumentation Sales Index table (see page 7) is made up of six executives from six companies, a majority of which reported substantially lower incentive bonuses in fiscal 2009. The average short-term compensation for the Index’s executives fell 39.3%, including a 58.1% drop in average incentive payment. Frank S. Hermance, president and CEO of AMETEK, reported a 73.3% decline in incentive compensation, as 80% of his performance measures were associated with earnings.

Average long-term compensation endured similar declines, falling 50.7%, but was primarily affected by the large equity award granted to Mr. Jellison in fiscal 2008. Excluding it, average long-term compensation soared 51.9% to $4,373,301, while the average total compensation grew 2.9% to $6,091,041 million.

Presidents of Dedicated Business Units

This year, IBO listed the presidents of companies’ dedicated instrument and laboratory products–related businesses in a separate table (see page 7) for a more accurate comparison. For these 12 executives, the average short-term and long-term compensation was $570,379 and $1,459,200, respectively. The total average compensation was $1.6 million.

The fiscal 2008 data for Gregory J. Herrema, president of Analytical Instruments at Thermo, and for Michael R. McMullen and Nicolas Roelofs of Agilent Technologies were not provided. Excluding these executives, in fiscal 2009, the average short-term compensation fell 18.2% to $547,009. The average incentive award fell 44.1% to $174,837, while average base salary climbed 4.7% to $372,172. The average total compensation declined 5.5% to $1,497,767, despite a 1.3% increase in average long-term compensation to $772,650.

Bradford J. Crutchfield, vice president and manager of Bio-Rad’s Life Science Group, recorded the largest increase in short-term compensation, including base salary and incentive awards. He also enjoyed the biggest percentage jump in total compensation, which climbed 29.9%. Aldo Pichelli, president and COO of Electronics and Communications for Teledyne Technologies, reported the largest percentage increase in long-term compensation, which rose 65.9% due to individual and company performance measures. However, Alan J. Malus, president of Laboratory Products at Thermo, had the largest total compensation.

The largest decrease in total compensation was sustained by Thomas Caratsch, head of Laboratory at Mettler-Toledo. His compensation package fell 33.8% due to lower target achievements. Similarly, John W. Hardin, president of AMETEK’s Electronic Instruments Group, was negatively impacted by missed EPS measures, as well as lower segment operating income and working capital goals. As a result, his total incentive pay was cut 63.0%.

Top 10 Total Compensation, 2009

Company Executive Total Pay

Thermo Fisher Scientific Mark N. Casper $34,283,774

Danaher H. Lawrence Culp, Jr. $11,049,312

Becton Dickinson & Co. Edward J. Ludwig $9,121,382

Agilent Technologies William P. Sullivan $7,570,516

Beckman Coulter Scott Garrett $6,133,784

Pall Eric Krasnoff $5,843,521

PerkinElmer Robert F. Friel $5,825,388

Illumina Jay T. Flatley $5,695,858

AMETEK F.S. Hermance $5,140,781

Life Technologies Gregory T. Lucier $4,508,854

Average $9,517,317

Top 10 Short-Term Raises, 2009

Company Executive % Chg.

Caliper Life Sciences E. Kevin Hrusovsky 133%

Affymetrix Kevin M. King 119%

Veeco Instruments John R. Peeler 53%

Bio-Rad Laboratories Bradford J. Crutchfield 50%

Life Technologies Gregory T. Lucier 47%

Cepheid John L. Bishop 47%

ICx Technologies Colin J. Cumming 38%

Bio-Rad Laboratories Norman Schwartz 21%

Strategic Diagnostics Francis M. DiNuzzo 20%

Enzo Biochem Elazar Rabbani, PhD 13%

Average 54%

Top 10 Short-Term Compensation, 2009

Company Executive Total Pay

Life Technologies Gregory T. Lucier $4,465,385

Roper Industries Brian D. Jellison $2,901,250

PerkinElmer Robert F. Friel $2,571,581

Becton Dickinson & Co. Edward J. Ludwig $2,570,000

QIAGEN Peer M. Schatz $1,893,000

Agilent Technologies William P. Sullivan $1,857,118

Teledyne Technologies Robert Mehrabian $1,849,154

Pall Eric Krasnoff $1,760,830

Beckman Coulter Scott Garrett $1,717,539

Thermo Fisher Scientific Mark N. Casper $1,614,753

Average $2,320,061

Top 10 Fair-Value Stock and Option Grant Recipients, 2009

Company Executive Fair Value

Thermo Fisher Scientific Mark N. Casper $32,401,218

Danaher H. Lawrence Culp, Jr. $9,685,492

Agilent Technologies William P. Sullivan $5,328,568

Illumina Jay T. Flatley $4,438,250

Beckman Coulter Scott Garrett $4,090,962

AMETEK F.S. Hermance $3,671,921

Becton Dickinson & Co. Edward J. Ludwig $3,599,433

Life Technologies Gregory T. Lucier $3,349,039

Luminex Patrick J. Balthrop $2,746,304

PerkinElmer Robert F. Friel $2,692,345

Average $7,200,353

Top 5 Total Compensation Increases, 2009

Company Executive % Chg.

CEOs

Thermo Fisher Scientific Mark N. Casper 270%

ICx Technologies Colin J. Cumming 245%

Danaher H. Lawrence Culp, Jr. 123%

Caliper Life Sciences E. Kevin Hrusovsky 94%

Accelrys Mark J. Emkjer 91%

Average 164%

Non-CEOs

Bio-Rad Laboratories Bradford J. Crutchfield 30%

Sigma-Aldrich Franklin D. Wicks 14%

Enzo Biochem Carl W. Balezentis, PhD 10%

Pall Roberto Perez 10%

Thermo Fisher Scientific Alan J. Malus 9%

Average 15%