AKRON—Goodyear´s directors have awarded CEO Robert J. Keegan a $2.6 million bonus for 2004, an amount more than double what Samir Gibara or Stan Gault ever earned as bonuses when they were chairmen of the tire maker.
The board on Feb. 22 approved Keegan´s bonus and a $680,000 bonus to Jon Rich, president of the North American Tire unit, according to company filings with the Securities and Exchange Commission. The filings stated the bonuses were based upon the achievement of specific financial targets set a year ago, as well as earnings before interest and tax and operating cash flow achieved. The board´s compensation committee approved funding for the 2004 payment pool at about 189 percent of the target amount set for bonuses.
The executive compensation awards reflect the fact Goodyear has come a long way since a few years ago when the company´s balance sheets were bleeding red from losses in North America and Europe and some were forecasting Chapter 11 bankruptcy in the company´s future.
"The compensation that we put in the filing is consistent with the progress that has been made in Goodyear´s turnaround efforts," a company spokesman said. "While we haven´t closed our 2004 books and finalized the results yet, 2004 was clearly a year that we exceeded the expectations of many in terms of our performance and progress toward the financial turnaround."
Keegan is credited with engineering Goodyear´s improvement through cost-cutting measures, layoffs, plant closings, restructuring loans and successful bargaining with union workers. The tire maker restored previously strained relations with its dealers, launched new products in 2004 and gained market share in North America.
Goodyear hasn´t released its official results, but said it will finish 2004 in the black—the first profitable year since 2001—and that operating earnings in North America had more than doubled. For the first nine months of 2004, Goodyear reduced its loss to $12.3 million from $372.3 million in 2003. Sales surged 20.5 percent to $13.5 billion.
Keegan´s 2004 salary hasn´t been disclosed yet, but he will make $1.1 million for 2005, effective May 1, the board decided. If targets are met this year, Keegan could get a bonus of $1.5 million and Rich $385,000, according to the SEC filings.
By comparison, the largest bonus Gibara earned in his six-year term as chairman was $961,875 paid out in 1997. Gault, who is credited with returning Goodyear to financial stability after the 1986 takeover bid by Sir James Goldsmith and other problems received a $1.16 million bonus in 1994, his largest amount.
Keegan´s bonus is far below what CEOs of many Fortune 500 companies earn, but nearly five times higher than the bonus Thomas Dattilo, chairman of rival Cooper Tire & Rubber Co. in Findlay, Ohio, made in 2002. Dattilo earned a bonus of $535,898 that year and no bonuses in 2003 or 2001, though Cooper did award him a 2003 payout of $413,465 in a stock-unit award.
Maurice Taylor Jr., president and CEO of Titan International Inc., earned no bonuses in 2003 and 2002 after receiving a bonus equal to his salary of $400,000 in 2001. At press time, Cooper and Titan had not yet filed 2004 proxy statements with the SEC.
Analyst Saul Ludwig of McDonald Investments Inc. declined to comment specifically on Keegan´s bonus but said his leadership is driving Goodyear´s turnaround.
"I think that Goodyear made a lot of progress in terms of the turnaround and that Keegan showed that he is doing some positive things that are beginning to take hold," Ludwig said. "He´s got a long way to go, but I think they´re out of the box anyway in terms of starting to deliver some performance."