TransDigm Group Inc., the Cleveland-based maker of aircraft parts, paid its chief executive officer $64.2 million in 2013, including dividend equivalents on vested options.
W. Nicholas Howley received $45.9 million tied to payouts on TransDigm’s common stock, according to a proxy statement filed today. Howley also received a $1.24 million bonus, $15.9 million in option awards and a $973,375 salary, according to the filing.
TransDigm only pays dividend equivalents on performance-vested options after goals have been met and the awards have vested, even if they haven’t been exercised, according to the filing. Howley’s 2013 compensation makes him one of the 10 highest-paid executives in the U.S., according to data compiled by Bloomberg from summary compensation tables.
“What I would be concerned about is: are those payments tax-deductible by the company,” Alan Johnson, a managing director of compensation consulting firm Johnson Associates, said in a phone interview from the company’s office in New York. “They’re not really performance-based on his part. That’s extraordinarily unusual. If the option goes out of the money, they get no money back.”
The company has paid four dividends since 2009, including $25 a share in June, which was more than three times the 2009 dividend, according to data compiled by Bloomberg. Howley’s payments were from distributions in 2009, 2012 and 2013, according to the proxy.
“Dividend equivalents are commonly used by public companies that compensate employees through restricted stock units or similar types of equity,” TransDigm said in the proxy statement. “The company believes that dividend equivalents are equally appropriate in the case of options in order to preserve equity-based incentives intended by the company at the time of award and to treat optionholders and stockholders consistently.”
Liza Sabol, a spokeswoman for TransDigm, didn’t immediately return calls for comment.