United Technologies

Annual meeting: April 29

United Technologies Chairman and CEO Greg Hayes received total compensation of $18.42 million in 2018, representing an increase of approximately 8%. Salary and bonus both increased slightly.

United Technologies appeared in a recent analysis by MarketWatch’s Francine McKenna, “Here’s one way to tell if a company is overpaying its CEO” about companies that award bonuses on the basis of non-GAAP figures. MarketWatch, using data provided by Audit Analytics, looked at “public companies’ recent use of metrics that adjust GAAP net income in earnings announcements and when calculating executive bonuses” that “used non-GAAP metrics to convert net losses to income and to meet executive bonus targets.” According to the analysis United Technologies GAAP earnings were $4.5 but the bonus calculation used non-GAAP earnings of $5.3. Had the company used GAAP earnings, the minimum threshold to trigger that bonus would not have been crossed.

MarketWatch’s research was inspired by a working paper, “High Non-GAAP Earnings Predict Abnormally High CEO Pay” by MIT’s Robert Pozen (with co-authors Nicholas Guest and S.P. Kothari).  The paper was summarized in a Wall Street Journal opinion piece Pozen subsequently wrote an editorial in the Wall Street Journal co-authored by SEC Commissioner Robert Jackson, “Executive Pay Needs a Transparent Scorecard.” While it is worth reading in full, the key paragraph is quoted below:

“Recent research co-authored by one of us shows that firms in the S&P 500 announced adjusted earnings that were, on average, 23% higher than GAAP earnings. At the same time, those firms reporting the largest differences between their adjusted and GAAP earnings awarded higher pay packages to their CEOs than predicted by the standard academic model of normal CEO compensation. Yet those firms with the largest differences, on average, experienced lower stock returns and subpar operating performance—hardly a basis for outsize compensation.”