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Special Report: Massachusetts CEO Pay

Like sports stars, top business players command big bucks

By Todd Wallack
Globe Staff / October 3, 2010

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They are the Alex Rodriguez, LeBron James, and Tiger Woods of Massachusetts chief executives — on payday, that is.

Marc N. Casper, J. Raymond Elliott, and Matthew W. Emmens are the highest paid chief executives of publicly traded companies in Massachusetts. New to their jobs last year, they are akin to the top free agents in sports who sign eye-popping deals.

The numbers are staggering: $34.3 million for Casper, the chief executive of Thermo Fisher Scientific Inc. In second place is Elliott, the new chief of Boston Scientific Corp., at $33.5 million, and then Emmens a distant third with $19.3 million from Vertex Pharmaceuticals Inc.

Frank B. Glassner, chief executive of Veritas Executive Compensation Consultants LLC, said he was “baffled’’ about why these companies doled out such huge packages. They “appear to be quite generous in light of both company size and performance,’’ he said.

To be sure, most of the payments are in stock awards and options — rather than cash — that will vest over time if the executives meet performance goals or remain with the company long enough. Adding to that, the values of the stock awards are just estimates; the actual amount of money CEOs receive depends on how many shares they wind up with, how the company’s stock performs, and when they cash them in.

And Jay Kizer, who heads the life sciences practice for executive recruiter firm Korn/Ferry International, said the competition for executives with success running major life sciences operations forces companies to offer large up-front packages.

“It’s no different than competing for the best professional athletes,’’ Kizer said. “Companies get into these bidding wars for the best of the best.’’

Kizer said finding such qualified executives is challenging: They have to oversee complex research for pioneering products, sophisticated manufacturing processes, and delicate negotiations with regulators and customers. And many life sciences executives inevitably suffer failures along the way, reducing the pool of those with unblemished resumes.

Casper, 42, was already Thermo Fisher’s chief operating officer when he was promoted last October to CEO. Based in Waltham, Thermo Fisher is the world’s largest supplier of laboratory instruments and equipment, with annual revenue of more than $10 billion.

His 2009 compensation included more than $790,000 in salary, $19.6 million in restricted stock, and $12.8 million in stock options. The stock awards included a combination of restricted stock and stock options that gradually vest through 2019, so long as he remains employed with the company and, in some cases, meets performance targets. For instance, some of his stock awards are slated to vest when the company’s stock price hits a certain level for 20 consecutive trading days and generates a minimum return for shareholders.

Casper also received more than $824,000 under an annual bonus plan designed to reward executives based on how well the company did in meeting its revenue, earnings, and other targets. For instance, the company set a target for revenue to fall by 5.77 percent for the first half of last year; revenue actually fell slightly more, reducing the bonus.

Thermo Fisher spokesman Ron O’Brien said Casper’s package was set by the board in consultation with outside advisers to make sure it was competitive with other companies of its size and stature. And he said comparing the compensation of Thermo Fisher’s CEO with that of the top executives at other Massachusetts firms is “not an apples to apples comparison.’’ O’Brien also noted that most of Casper’s pay is in the form of long-term compensation.

Elliott, 61, was a director at Boston Scientific before he was chosen to lead the company.

Elliott, whose experience includes running another medical device company, Zimmer Holdings Inc., was paid a performance bonus of nearly $608,000 last year, in addition to a $1.5 million signing bonus and $29.4 million in stock awards and options. Most of those will gradually vest through 2013, provided he remains with the company through this period.

Some of the stock, however, will vest only if the company’s share price rises to specific targets. For example, Elliott will receive 250,000 shares if the stock hits $20 for 10 straight trading days.

Last year, Boston Scientific reported a $1 billion loss, its fourth straight year in the red. And in February, Boston Scientific agreed to pay $1.7 billion to settle patent infringement charges from rival Johnson & Johnson, making it likely the company will post another loss this year.

“The bottom line is that the bulk of Mr. Elliott’s compensation depends directly on the amount of value created for the company’s shareholders,’’ said company spokesman Paul Donovan.

Emmens, the new Vertex CEO, was a board member at his company before succeeding CEO and founder Joshua Boger. He had previously run British drug maker Shire PLC for five years.

The 59-year-old has a big job ahead: Bringing Vertex’s experimental hepatitis C treatment to market as early as next year. Anticipating a blockbuster treatment, Vertex investors have driven the company’s market capitalization to more than $7 billion, even though it doesn’t have any other drugs on the market.

His pay package included more than $15 million in restricted stock and options. The restricted stock vests in February 2012, while the options will gradually vest over four years.

Vertex spokesman Zachry Barber said Emmens’s compensation is “market based’’ — meaning Vertex researched what other companies pay their executives and what it takes to recruit someone with Emmens’s qualifications.

Glassner, the executive compensation consultant, said that he doubted the mammoth awards these CEOs have been paid would spark a salary war among other companies because shareholders and board members are generally more sensitive to concerns about excessive executive compensation.

If other companies tried to use the pay packages as an excuse to give their own CEOs hefty raises, Glassner said it “would be akin to wearing flannel red pajamas and running around with a herd full of angry bulls.’’

Todd Wallack can be reached at twallack@globe.com.