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This just in: A new No. 1

Overlooked in the first reports of 2005's highest-paid CEOs, Barry Diller emerges at the top in a new analysis. And No. 2 is another familiar name.

By MARK ALBRIGHT
Published October 27, 2006

Barry Diller has won the dubious distinction as the highest paid, and by some measures the most overpaid, chief executive among big publicly traded companies.

Already a billionaire whose e-commerce conglomerate IAC/InterActiveCorp owns HSN in St. Petersburg, Diller raked in $295.1-million in total compensation in 2005.

All but $4.77-million of it came from stock options either awarded or cashed in. That was enough to pull Diller ahead of Richard Fairbank, chief executive of credit card giant Capital One Financial, in an annual compensation survey of 1,388 CEOs compiled by Corporate Library, a Portland, Maine, research firm. Fairbank picked up $249.4-million, all but $136,000 of it from stock options.

Stock options and outright awards have become a favored form of CEO pay because they supposedly align the top executive's rewards with shareholder interest. But in Diller's case, IAC's stock price slumped 7 percent in 2005 despite rising 11 percent over the three years ended December 2005. And his move to split IAC's travel units off as Expedia Inc. fared even worse. The stock price of the spin-off dropped 35 percent in 2005.

In fairness, much of Diller's payoff came from his decision to cash in stock options he had let build up for a decade.

Lured by cable TV magnate and Liberty Media Chairman John Malone to take over then-adrift HSN in 1995, Diller took a $500,000 salary, a $5-million loan to buy shares and a flyer on a package of then-dicey stock grants and options. Through a decade of wheeling and dealing, he parlayed HSN into an empire of two conglomerates that Wall Street today values at a combined $14.4-billion.

Nonetheless, in 2005 Diller made other CEOs' lavish perks look small.

The mercurial growth of CEO pay lost steam last year, according to Corporate Library. Including the value of exercised stock options, median total annual compensation jumped 16 percent to about $3-million, down from a 30-percent increase in 2004. Among companies in the S&P 500, the median was $7-million.

Diller told the New York Times he was not overpaid, "considering the wealth created for shareholders over the last 11 years, me certainly among them."

However, Diller's subsequent rewards to stick around five more years stick out, too.

Another CEO pay survey compiled of 2,400 companies by Glass Lewis & Co., a San Francisco firm, only reflects new options granted in 2005.

In that survey, Diller's one-year pay package tops the list at $85-million. He got every one of the stock options awarded by the company he controls through an ownership structure that gives him 56 percent of the votes. His IAC salary was cut in half to $465,000 after the Expedia spin-off, but the compensation committee awarded him a $3.2-million bonus.

"By any objective measure," Jonathon Weil, managing director of Glass Lewis told the New York Times, "Barry Diller is grossly overpaid."

Paul Hodgson, senior research analyst for Corporate Library, noted that Diller, 64, didn't need more options to stay put another few years even though he had not been awarded any since 1997.

Diller made $441-million profit selling previous grant options over the previous two years.

He still has $167-million in vested options he has yet to exercise.

Including salary, stock and bonuses, Diller got from the Expedia spinoff he still heads, he reaped $469.7-million from the two companies in 2005.

"By any reasonable standards, Mr. Diller has been paid enough," said Hodgson.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

[Last modified October 27, 2006, 07:59:03]