Ceo Pay: The More Things Change...

Facing a tight market for talent, even independent boards richly reward mediocre performance

The compensation committee at Dominion Resources Inc. (D), a Virginia utility, is squeaky clean: five members, no insiders. But last year it did something that used to be seen only on insider committees. It turned a bad year for shareholders into a good year for the boss. While Dominion shareholders lost 10.9% on their stock, the committee handed CEO Thomas E. Capps a 192% pay hike, including options valued at $8.9 million that brought his 1999 compensation to $11.3 million. In its proxy, Dominion said the big paycheck was awarded because net income of $363 million exceeded Capps's goals. Indeed, for an electrical utility, Dominion's 9.5% increase in operating earnings for the year represented strong growth. But there was another reason Dominion wanted to reward Capps: It didn't want to lose him. "You have to recognize what's being done in the marketplace," says committee Chairman Kenneth A. Randall. "Otherwise, you just have your head in the sand."

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