Philip Morris International
Annual Meeting: May 6
Total compensation for Philip Morris CEO André Calantzopoulos for 2019 was $22,125,060. Last year his pay was $15,934,235. This increase of approximately $6.2m, or 39%, is not justified by the company’s performance.
Two specific elements contributed the most to the increase. The largest increase grew from the NEIC which more than doubled over the past year, from $2,336,771 to $5,491,500. The company discloses each element of the annual incentive. One of the metrics was market share, including that of cigarettes. The company notes that “Marlboro’s share of the cigarette market was at an all-time high at 10.0%, excluding China and the U.S., and Marlboro remains the number one global brand. Importantly, our total market share in Russia and Japan grew by 1.8 and 0.5 percentage points, respectively, from 2018.”
Another metric that helped deliver the large bonus was operating cash flow excluding currency. I am unable to evaluate the currency exclusions or implications. This suggests an area where financial calculations could be non-objective.
There was also a significant increase in value of the CEO’s pension of $5,303,609.
The company has 73,500 employees. The company uses a “cost-of-living adjusted ratio based on the purchasing power parity index (or PPP) [which] reflects the differences in the living and economic conditions of approximately 90 countries” to come up with their adjusted pay ratio of 396:1.
The company notes that had it not used the PPP adjustment, the total 2019 compensation of the median employee, identified as working in Indonesia, would have been approximately $19,134. In that case, the pay ratio would be 1,156:1.
The company points out that the $19,134 pay in Indonesia is considerably above the average in that country. The company goes on to disclose that in Switzerland, where the company is headquartered, they have 3,500 employees, and the pay ratio of the CEO to those employees is 61:1.
However, if we are adjusting for locations it is worth noting that CEOs in Europe are generally paid much less than those in the U.S. This is not the case at Philip Morris. I have no information on the pay for CEOs in Indonesia but expect one could be found there making less than $22 million.