December 5, 2008
How we did it
The Sun's report on corporate chief-executive compensation in Maryland
is based on data gathered by Aon Corp., a global benefits consulting firm
based in Chicago, under a contract with Tribune Co. newspapers. Aon
obtained the data from the most recent proxy statements or annual
reports filed by 88 Maryland-headquartered companies with the
Securities and Exchange Commission on or before April 30.
Figures represent compensation for the two most recent reporting
years, whether calendar or fiscal years.
Aon did its research for chief executive officers only.
Cash compensation consists of base salary plus annual bonus.
"Rest." refers to grants of restricted stock, which are shares the CEO
gains full ownership of if he or she remains at the company for a
specified period of time.
LTIP stands for long-term incentive plans, which some companies have to
reward executives for company performance over several years.
"Other" compensation includes such things as the value of personal use of
company automobiles or aircraft, country club memberships, financial
planning services, insurance premiums paid by the company, and
contributions to retirement plans.
Stock options allow an executive to purchase a specific number of shares
at a specified price in the future. They pay off only if the company's stock
price increases, although companies are required to estimate their
present-day value.
Companies can use several different methods of determining that value.
To allow for uniform comparisons between companies, Aon calculated the
value of options for all companies by using what is known as the Black-
Scholes method, using standardized assumptions on interest rates and
other factors that go into that formula. Because of this, Aon's computed
values for stock options differ from those assigned by the companies in
many cases, even for companies that used the Black-Scholes method.
Total compensation figures exclude gains from exercising stock options
but do include value of options awarded during 2004 as calculated by
Aon.
-- Bernie Kohn
Assistant Managing Editor/Business
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Copyright © 2008, The Baltimore Sun
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