A Double Gold Star And Two Booby Prizes

Novell Inc.'s Raymond J. Noorda disdains fancy cars in favor of a rugged pickup truck for the daily drive to his corporate offices. The founder of the immensely successful Provo (Utah) software company has a similarly utilitarian approach to his pay. Over the past three years, Noorda has taken home only $275,000 in total, with the bulk of that amount in his 1992 earnings--$198,830. And that, say executives of Novell, cameonly at the insistence of his board of directors, who believed the CEO's pay should be more like that of his Silicon Valley counterparts. It still won't even come close.

His skimpy paycheck and high returns to shareholders make the 68-year-old Noorda the winner in this year's pay-for-performance rankings. In BUSINESS WEEK's latest analysis, Noorda tops two categories: giving the stockholders the most bang for their buck as well as giving them the highest return on equity (ROE) relative to his own pay. In just three years, shareholders have seen an initial $100 investment in Novell, with an impressive 25.5% ROE, balloon into $635. But any investor hunting for Noorda's compensation in the company's proxy could have easily mistaken the number for some minor executive perk: He earned all of $37,370 in 1991 and $38,753 in 1990.

Who said you get what you pay for? Noorda's insistence on top-notch networking software, combined with his philosophy of "coopetition"--a willingness to form alliances so Novell's products can link computers of all types--have made it the No.1 networking company. In 1992, profits surged to $249 million, up from $94 million in 1990, while revenues almost doubled, to $933 million. Noorda isn't going unrewarded, though. As the company's largest shareholder, his 10% stake makes him a billionaire--rich enough to afford a different pickup truck for every day of the year.

STUNNING SUM. And the CEO who gave his shareholders the least return for his pay? For the second straight year, that unenviable title goes to Anthony J.F. O'Reilly of H.J. Heinz Co. It's not that Heinz stockholders have made out badly: They've enjoyed a 34.8% return over the past three years. It's that O'Reilly has made out so stunningly, pulling down $115.3 million from 1990 to 1992.

After topping last year's pay derby with a then-unsurpassed $75.1 million, O'Reilly went on to bag $36.9 million for the fiscal year ended May 1. Only $1.3 million of that sum was in the form of salary and bonus, however. Most of the money comes from exercising a hoard of stock options, which O'Reilly says reflect a 10-year period of performance worthy of his pay--not just the three years measured.

In the past year, O'Reilly has turned up the heat on promotions, in a strategy that helped Heinz's major brands gain market share. "I think, frankly, he came closer to earning his money this year than he did last," says Prudential Securities Inc. analyst John M. McMillin. Still, O'Reilly is expected to fall short of his vow to hike this year's earnings by 8%, to $2.60 a share. Results have been crimped by currency fluctuations in Britain and Italy. O'Reilly's new target: $2.50 a share.

Joining O'Reilly in the least-bang-for-the-buck ranks is Kenneth H. Olsen, former CEO of Digital Equipment Corp., the company that performed the worst relative to its CEO's pay. He earned nearly $1 million for each of the past three years--hardly a princely amount--but he presided in the meantime over an unraveling of his company's fortunes.

Following a $2.8 billion loss last year, directors ousted the legendary entrepreneur, who had built the $14 billion company from nothing. As recently as June, 1990, DEC was virtually debt-free and boasted $2 billion in cash. But staff shufflings and a costly acquisition binge saddled the company with $2.5 billion in charges and $1 billion in debt. Olsen's successor, Robert B. Palmer, the former vice-president for manufacturing, has accelerated staff cuts and plant closings, slashing 15,000 jobs. Those are drastic measures--but maybe they'll keep Palmer off the sour side of this list in the future.