TECO Energy comments on executive compensation, Dow Jones coverage
TAMPA, March 7, 2003
TECO Energy today responded to an article circulated this morning by Dow Jones Newswires, focusing on the compensation of the company’s chief executive, Robert Fagan. The article was circulated following the filing of TECO Energy’s proxy statement.
Chief Human Resources Officer Clint Childress said, “The article was based on oversimplified and potentially misleading comparisons, and we wanted to reduce the potential for misinformation.”
At TECO Energy, executive compensation is made up of three components: base salary, annual incentive pay and long-term incentive pay. Fagan’s salary increased 8 percent during 2002, based on 2001 results, which were very strong. “This is consistent with salary ranges for executives with similar positions, as measured by market data,” said Childress.
Fagan’s salary, like the salaries of other TECO Energy company executives, was frozen for 2003.
The Dow Jones article references Fagan’s 2002 stock options, which numbered 168,110 at a price of $27.97. The article failed to take into consideration that at today’s stock price, the options have no value.
“It is exactly for this reason that stock options are one component of our executive compensation package @ they are a direct incentive for company performance,” said Childress.
The article also included the payout for performance shares that were granted in 1999 but did not vest until 2002. Because there was no similar payout in 2001, the comparison to 2001 was naturally skewed.
The article also included the grant of time-vested restricted stock, valued at that time at $857,000, which is valued today at about 37.5 percent of that amount. Again, this type of award was not granted in 2001, and thus a comparison to 2001 is naturally going to be skewed.
In 2002, TECO Energy’s Compensation Committee of the Board of Directors adopted a balanced, three-pronged approach to long-term incentives, which many companies are now adopting. This approach includes performance-based and time-based restricted stock, as well as options, because restricted stock is gaining popularity over programs with stock options alone.
Childress added that Fagan’s 2002 cash compensation was actually less than it was in the previous year, far from the “doubled”reference used by Dow Jones.
TECO Energy, Inc. (NYSE: TE) is a diversified, energy-related holding company based in Tampa. Its principal businesses are Tampa Electric, Peoples Gas, TECO Power Services, TECO Transport, TECO Coal and TECO Solutions.