Four siblings and officers with Dillard’s Inc. were among the highest paid public company executives in Arkansas last year, each earning more than $21 million.

William Dillard II, the Little Rock retailer’s chief executive officer, earned more than $36 million last year, the most of any Arkansas publicly traded firm’s officers. Alex Dillard, the firm’s president, was second in the state, making almost $36 million.

The pair’s brother, Michael Dillard, a company vice president, was fourth in executive pay last year with $21.2 million. The Dillard brothers’ sister, Drue Matheny, earned $21.1 million.

Michael Duke, Wal-Mart’s chief executive officer, earned about $27 million last year, the third highest pay among the state’s top public company officers. Duke was the highest paid executive in the state in 2011 with almost $18 million in total pay.

All four Dillard’s executives benefited from acquiring 300,000 to 500,000 shares of stock options and exercising those options. William and Alex Dillard each made $31.1 million from selling stock options. Michael Dillard and Drue Matheny earned about $18.8 million each by selling stock options.

The Arkansas Democrat-Gazette determines executive compensation with The Associated Press method of adding salary, bonus, incentives, perks, above-market returns on deferred compensation, and including the estimated value of stock options and awards granted during the year.

Stock options are becoming less favorable in the public market, said Joshua Henke, managing director for Longnecker & Associates, an executive-compensation consulting firm in Houston.

“They have become much more dilutive to shareholders,” Henke said. “So what many companies have done, while they still may use stock options, they will grant regular performance shares with them.”

Performance stock is awarded based on the company’s performance.

“So there has been a shift away from stock options, although maybe not completely,” Henke said.

William Dillard’s overall compensation was the most since Scott Ford, chief executive officer at Alltel, made more than $190 million in 2007, the year Alltel was sold.

The incomes aren’t out of line compared with other top executives of public companies, Henke said.

“There is a competitive issue for talent, in Arkansas and the Southeast region [of the country],” Henke said. “A lot of that will come with adjustments to compensation packages, specifically through the use of long-term equity or long-term restricted stock.”

Some institutions will argue that it is better to have more pay for executives based on performance of the company, Henke said.

“Some companies are thinking more strategically in how to retain their talent as the market picks back up,” Henke said. “There is a tight labor market out there [for executives]. Companies are trying the best they can to retain the talent they have.”

Most Dillard’s stockholders likely aren’t concerned with their executives’ high incomes, because Dillard’s had the highest stock return in the past five years of any Arkansas company. A $100 investment in Dillard’s in early 2008 was worth $473 - almost a five-fold increase - in February this year.

Dillard’s stock has skyrocketed since November 2008, when it fell to $2.62. The stock closed Tuesday at $80.02 per share.

The 83 officers in the proxy statements of 18 Arkansas companies earned more than $354 million last year, up 64 percent from the almost $216 million in 2011. Forty-six of the executives made more than $1 million last year.

The median income was about $1,216,000, meaning half of the executives made more and half made less. That equals about 55 times Arkansas’ per capita income of $21,833, according to the U.S. Census.

ADDITIONAL INFORMATION

Proxy statements also disclose more than just income for the top executives.

For example, Home Banc-Shares had total loans last year, including available borrowings, of about $33 million with its directors and officers and the directors and officers of Centennial Bank, which is owned by Home BancShares.

The loan amount is not particularly high for a large bank, said Randy Dennis, president of DD&F Consulting Group of Little Rock, a bank consulting firm.

“Home BancShares’ philosophy has always been [even before the company went public] that if you want to buy stock in this bank, they want you to be partners with them,” Dennis said. “They want your deposit accounts and your loans. They want to do business with you.”

Some of Home BancShares’ directors, such as Richard Ashley, likely use loans for their businesses, Dennis said. Ashley is owner of Ashley Co., a private firm that is involved in land development and investments in seven states, and has served as vice chairman of Home Banc-Shares from 2006 to 2007.

The law requires that no loans with a bank’s executives or officers can be on more favorable terms than with any other customer, Dennis said.

Other information disclosed in the Arkansas-based companies’ proxies include:

Dillard’s - Denise Mahaffy, a company vice president and sister of William, Alex and Michael Dillard and Drue Matheny, earned a salary and bonus of $650,000 last year.

William Dillard III, a company vice president, also had a salary and bonus of $650,000 last year.

Alexandra Dillard, a Dillard’s divisional merchandise manager and daughter of Alex Dillard, made $190,000 last year in salary and bonus.

Annemarie Dillard, also a divisional merchandise manager and daughter of Alex Dillard, made $160,000 in salary and bonus last year.

Media businesses owned in part by Warren Stephens, a Dillard’s director, received advertising fees from Dillard’s totaling about $4.1 million last year.

J.B. Hunt Transport Services - An unnamed son-in law of Kirk Thompson, chairman of J.B. Hunt, earned about $428,000 last year.

Tyson Foods - Tyson Foods paid about $1.1 million last year for wastewater treatment to companies owned in part by members of the Tyson family.

Wal-Mart - Lori Haynie, sister of executive officer C. Douglas McMillon, is an executive of Mahco Inc. Wal-Mart paid Mahco $13 million for purchases of sporting goods and related products.

Marissa Mayer, a Wal-Mart director, is chief executive officer of Yahoo! Inc. Wal-Mart paid Yahoo $12.4 million last year for advertising space on Yahoo’s websites.

Eric Scott, the son of director H. Lee Scott, is chairman and an indirect owner of Cheyenne Industries. Wal-Mart paid Cheyenne and its subsidiaries $29.4 million last year for the purchases of home furnishings and related products.

Last year, Arvest Bank, collectively owned by Jim Walton, Rob Walton and a trust of which Jim Walton is the trustee, and some Arvest subsidiaries paid Wal-Mart $996,000 for rent of supercenter and Neighborhood Market space.

Other Wal-Mart employees who are relatives of management included Stephen Weber, son-in-law of Michael Duke, who earned a salary of $127,000 last year; Nichole Bray, sister-in law of McMillon, earned a salary of $122,200; Greg Bray, McMillon’s brother-in-law, made $160,000 in salary; and Timothy Togami, the brother-in-law of executive officer Rollin Ford, earned about $178,000 in salary last year.

Highest paid executives

1. William Dillard II, Dillard’s $36.01 million
2. Alex Dillard, Dillard’s 35.97 million
3. Michael Duke, Wal-Mart 27.1 million
4. Michael Dillard, Dillard’s 21.2 million
5. Drue Matheny, Dillard’s 21.1 million

Highest value of executives' stock

1. Alex Dillard, Dillard’s $433.4 million
2. William Dillard II, Dillard’s 405.2 million
3. Michael Dillard, Dillard’s 392.5 million
4. George Gleason, Bank of the Ozarks 164.9 million
5. Michael Duke, Wal-Mart 135.6 million

Highest increase in salary and bonus

1. Steven Cosse, Murphy Oil 493.6%
2. Tom Fritsche, First Federal 275.4
3. Nada Stirratt, Acxiom 190.5
4. Warren Jenson, Acxiom 126.2
5. Richard Howe, Inuvo 99.6

Highest return on 5-year, $100 investment

1. Dillard’s $473
2. America's Car-Mart 322
3. Bank of the Ozarks 275
4. J.B. Hunt Transport Services 232
5. Home BancShares 198

Highest increase in net income from 2011

1. Deltic Timber 247.3%
2. P.A.M. Transportation Services 195.2
3. First Federal 104.0
4. AERT 75.3
5. Inuvo 21.8

Highest value of stock for non-executive individuals

1. The Walton Family, Wal-Mart $126.7 billion
2. Johnelle Hunt, J.B. Hunt Transport 1.5 billion
3. Madison Murphy, Murphy Oil, Deltic Timber 399.1 million
4. Wayne Garrison, J.B. Hunt Transport 255.7 million
5. Richard Massey, First Federal 159.8 million

Business, Pages 77 on 09/29/2013