Caterpillar cuts CEO’s 2013 pay to $12M as profit and sales fell

Machinery manufacturer hit by a downturn in heavy equipment used in mining.

April 22, 2014   by ASSOCIATED PRESS

Cat 740B with 39.5 tonnes  rated payload. Photo: Caterpillar

Cat 740B with 39.5 tonnes rated payload. Photo: Caterpillar

DALLAS — Caterpillar Inc. cut the value of its CEO’s pay package by 32% to $12 million in 2013, a year when the heavy machinery maker saw its profits fall by a third, according to an Associated Press analysis.

Chairman and CEO Douglas Oberhelman got a small raise in salary last year, but the more important parts of his compensation – cash incentives and stock options – fell.

The analysis of Oberhelman’s compensation considered salary, bonus, perks and the estimated value of stock and option grants that the company reported to the US Securities and Exchange Commission. The calculation excluded changes in the present value of the CEO’s pension benefits, which makes the total differ from the one that Caterpillar reported in a summary table of April 21’s filing.

Oberhelman’s salary rose 2% to $1.6 million. However, his cash incentive payment fell by more than half, to $2.24 million from $5.05 million in 2012 based partly on the company’s 2013 performance and partly on 2011-2013 numbers. The value of his stock options on the day they were granted dropped to $7.97 million from $10.78 million in 2012.

Miscellaneous “other compensation” dropped to $217,299 from $345,580, mostly because spending on an outside security vendor at Oberhelman’s home dropped to $4,926 from $94,397 in 2012 and $20,754 in 2011. Spokeswoman Rachel Potts said the 2012 spending was due to installation of a security system and the 2013 security spending went for monitoring the system.

In explaining Oberhelman’s compensation, Caterpillar said in the filing that revenue and earnings targets for 2013 “were not met.” But it gave him good grades for controlling costs, improving the balance sheet, buying back $2 billion in company shares, and increasing the dividend.

The company last reduced the CEO’s compensation in 2009, Potts said.

The Peoria, Illinois-based company was hit hard last year by a downturn in heavy equipment used in mining. Profit tumbled 33% to $3.79 billion – a decline of nearly $2 billion – and earnings per share dropped to $5.75 from $8.48 in 2012. Revenue fell 16% to $55.66 billion.

But thanks to the share buybacks and a December rally in the stock, Caterpillar shares ended 2013 up 1% for the year.

The company ended the year with 118,501 employees, a reduction of 6,840 jobs or 5.5% of the workforce. More than half the company’s employees work outside the US.

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