- The Washington Times - Tuesday, April 21, 2009

HARTFORD, CONN. (AP) - Caterpillar Inc. Chairman and Chief Executive James W. Owens received 2008 compensation valued at $14.6 million, down about 1 percent from the previous year, according to an Associated Press calculation of figures filed with regulators Tuesday.

Owens, 63, received a base salary of $1.6 million from the world’s largest maker of construction and mining equipment, up about 2.5 percent from 2007. He also received a performance-based bonus of $4.4 million, down about 2 percent from the previous year.

The bulk of his compensation came in the form of stock options valued at $7.5 million on the day they were granted in March 2008, but they are currently of little value, given that their exercise price of $73.20 each is more than double Caterpillar’s current stock value. Owens also received stock awards valued at $981,794 when they were granted in March, but their value has also plunged with the company’s stock price.

Owens received perks totaling $288,369, mostly in the form of company matching contributions to a deferred compensation plan.

The Associated Press formula is designed to isolate the value the company’s board placed on the executive’s total compensation package in the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimate value of stock options and awards granted during the year.

The calculations don’t include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the SEC, which reflect the size of the accounting charge taken for the executive’s compensation in the previous fiscal year.

Caterpillar reported a slight increase in 2008 earnings as revenue climbed 14 percent to $51.3 billion. But the manufacturer of construction and mining equipment has been hit hard by slowing demand for heavy construction equipment amid the global recession. Shares tumbled 38 percent to end the year at $44.67, about half of what the stock was worth in the spring of 2008.

On Tuesday the company reported a first-quarter loss of $112 million, hurt by sharp sales declines across the globe and a big charge for recent layoffs. The stock has fallen further in the first few months of 2009, closing Tuesday at $31.39.

Caterpillar said in its proxy statement that it faces “unprecedented economic challenges” this year and has suspended merit increases and frozen salary structures for all management and support staff. Owens’ salary has been frozen since April 1, 2007.

Executives’ compensation for 2009 will be reduced dramatically, the company said. For example, payments under its short-term incentive plans will be based on the company’s “extremely challenging goal” of earning $2.50 per share, it said. Analysts surveyed by Thomson Reuters expect the company to earn just $1.77 per share in 2009 and do not expect the Peoria, Ill.-based company to surpass earnings of $2.50 per share until 2012.

Caterpillar said the “most critical results” for judging Owens’ performance in 2008 were that sales and revenue exceeded the company’s 2008 goal of $48.6 billion. The company also pointed out that profit per share was higher than the previous year, but did fall below the 2008 goal of $6 as strong sales were offset by higher costs for materials and freight.

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