Executive salaries: why they are what they are

Executive compensation is often the subject of news stories when companies such as Wisconsin Energy, the parent company of We Energies, publish their annual reports and proxy statements for stockholders.

Executive compensation at Wisconsin Energy is determined by members of the board of directors who are elected by the stockholders. The board’s policy is to target the middle of the pay range for individuals in similar positions in similar companies nationwide. In other words, don’t overpay, but don’t underpay either. The same policy applies to all positions in the company.

Only a portion of executive base pay is included in rates. For example, just 15 percent of the chief executive officer’s total compensation is covered in rates. The rest is paid stockholders or by other business lines that are part of Wisconsin Energy. The total cost of the senior executive team in 2011 was about $2.50 per customer.

Incentive compensation – paid entirely by stockholders – is tied to objectives set by the board of directors. No performance means no bonus. Incentive compensation was paid for 2011 because the company met or exceeded goals.

The board considered the financial and operational performance for the year, including:

• Record earnings from continuing operations. 
• Total shareholder return over the past three years that exceeded returns of the S&P 500, Dow Jones Industrials, NASDAQ or peer group of regulated utilities. 
• Highest earnings per share in company history. 
• WEC common stock trading at an all-time high of $35.38 on Dec. 30, 2011. 
• Dividend increase of 30 percent. 
• Highest customer satisfaction since Wisconsin Electric and Wisconsin Gas merger. 
• Most reliable utility in the Midwest recognition for seventh time in past 10 years. 
• Best safety record in company history. 
• Successful completion of Unit 2 at Oak Creek Expansion project.