Caterpillar CEO takes 54 percent cut in compensation as equipment maker weathers the recession

Caterpillar CEO compensation falls 54 percent

OMAHA, Neb. — Last year, Caterpillar Inc. gave Chairman and CEO Jim Owens less than half the $14.6 million compensation he received in 2008 as the world’s biggest maker of mining and construction equipment endured the recession and eliminated thousands of jobs.

An Associated Press analysis of a Securities and Exchange Commission filing Friday shows Caterpillar delivered the executive compensation reductions it promised in December 2008 as part of broad cost-cutting at the company based in Peoria, Ill.

Owens received compensation worth $6.8 million in 2009 — 54 percent less the previous year because Caterpillar gave out no short-term bonuses and significantly less stock-based compensation because company profit fell well short of the board’s $2.50 per share goal.

The board said Caterpillar faced “the most significant recessionary industry conditions since the 1930s” in 2009.

The company slashed 19,000 full-time jobs and eliminated about 18,000 contract and part time workers last year as customers stopped buying equipment and rode out the recession with the inventory on hand. Caterpillar officials had said executive compensation would be cut up to 50 percent in 2009, and merit pay increases were suspended for managers and support staff.

Caterpillar’s 2009 profit plummeted nearly 75 percent to $895 million, or $1.43 per share, from $3.56 billion, or $5.66 per share, in 2008. If one-time costs like those related to the thousands of job cuts were excluded, Caterpillar would have earned $2.18 per share last year.

But Owens did receive stock options and restricted stock grants worth nearly $4 million last year because the board was pleased Caterpillar still delivered earnings per share of $1.43 during the Great Recession. The board also praised Owens’ leadership and efforts to improve the company’s balance sheet in the face of a $19 billion drop in sales.

Owens’ salary of $1.55 million has been frozen since April 1, 2007.

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

The calculations don’t include changes in the present value of pension benefits, making the AP total different in most cases than the total reported by companies to the Securities and Exchange Commission.

On the Net:

Caterpillar Inc.: www.cat.com