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<<<< Nabeel Gareeb, chief executive of MEMC Electronic Materials Inc. in O’Fallon, Mo., cashed in stock options worth $77.7 million to lead all other St. Louis area executives in pay last year.

Gareeb, who has run the silicon wafer maker for nearly seven years, garnered just under $80 million in compensation, including an $850,000 salary and incentive pay of $931,600.

Gareeb’s pay was the highest found since the Post-Dispatch began examining executive pay in 1994. He was one of 13 executives whose earnings totaled more than $10 million. Gareeb’s pay was more than twice his nearest competitor.

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The Post-Dispatch uses information from regulatory filings by area companies to analyze compensation. Public stock companies are required to disclose the compensation of the top five executives who were paid at least $100,000.

The newspaper computes pay using a method developed by The Corporate Library of Portland, Maine. The company monitors corporate governance and pay nationwide. Their methodology gets closer to the compensation that the executive actually receives than the figure that companies are required to list in their proxy statements.

Total compensation includes an executive’s salary, bonus, incentive pay, the value of stock options exercised and stock awards that vested in the most recent year as well as changes in the value of pensions and other pay listed in a company’s proxy statement.

Gareeb’s salary and incentive bonus pale in comparison to his profit on stock options, the result of exercising 1.65 million stock options last year. In addition to last year’s $77.7 million gain, Gareeb exercised 1.1 million options in 2005 that netted him $18.3 million and 100,000 options in 2006 for a gain of $3.87 million.

Stock options allow executives to buy stock in the future at a price fixed when the option is issued, usually the market price of the stock when the option is given. An option has no value when it’s issued at the market price. As the stock price rises above the exercise price, the option gains value.

When Gareeb arrived at MEMC in 2001, the silicon-wafer manufacturer was teetering on the brink of bankruptcy. The stock hit a low of just over $3 a share in September 2002.

An outside investment group, Texas Pacific Group, had bought a controlling interest in the company and made drastic changes, including slashing MEMC’s debt, firing the previous chief executive and bringing in Gareeb.

Gareeb received an initial grant of 2.3 million options as an incentive to turn the company around in 2002. As that turnaround proceeded, the stock climbed to a high of more than $90 late last year. However, the shares have dipped below $30 recently as the market for silicon wafers softened. The wafers are used in computers, solar panels and a wide range of electronic products.

In addition to the initial option grant, Gareeb received additional grants totaling 3.45 million shares from 2003 until 2006. At the time this year’s proxy was filed, Gareeb held more than 2 million options he had yet to exercise.

Gareeb’s most recent option grant, awarded in 2006, was in "performance" options, which require him to stay with the company for four years and also require that the company’s common stock outperforms the Standard & Poor’s 500 index over the four-year period.

A report by MEMC’s compensation committee in the company’s proxy statement says options are a good way to reward executives because they have no value when they’re granted and only pay off when the company’s stock rises no teletrack payday loans. The use of performance options increases the incentive by requiring improvement over a longer period of time, the report said.

Many people who follow executive pay agree that an executive benefits from stock options only when a company’s stock does well. However, when a stock goes up for reasons unrelated to executive performance, an executive benefits regardless of his role in running the company.

Stock options and other stock awards were the biggest factor in the pay of the remaining top 10 executives in this year’s survey.

In second place was Richard M. Whiting, who left Peabody Energy Corp. late last year to head up Patriot Coal Corp., spun off by Peabody in November.

Whiting’s $33 million in pay from Peabody included $22 million in profit from stock options, many of them issued when Peabody went public in 2000. In addition, he got shares worth $10.1 million. Some of the stock was part of his termination package from Peabody.

Whiting also drew pay at Patriot, where his earnings of $250,477 consisted largely of salary and bonus awarded for two months of work. Whiting’s base salary at Patriot is $700,000. The last full year he worked at Peabody, his salary was $540,750.

Hugh Grant, chairman, president and chief executive of Monsanto Co., came in third with $23.5 million in pay, including $12.2 million in profit from options and $6.8 million in stock grants that vested last year.

Grant was among eight executives who earned salaries of $1 million or more: His $1.13 million salary was the fifth-highest in the area. He also got a "non-equity incentive" payment of $2.98 million. Non-equity incentives are bonuses, usually cash, that are based on performance.

Current Peabody executives accounted for four of the top 10 executives in pay, also thanks largely to option profits. Peabody’s stock price has risen dramatically in recent years in response to rising energy prices and demand for coal, and many executives had options before Peabody went public in 2000.

Peabody executives who ranked in the top 10 included:

•Gregory Boyce, chairman and chief executive, with total pay of $22.6 million, including $15.6 million in option profit, $4.3 million in stock and a $1 million bonus. Boyce ranked fourth among St. Louis executives.

•Richard A. Navarre, president, with $21 million in pay, including $17 million in option profits and $2.4 million in stock. He was fifth in pay here.

•Roger B. Walcott Jr., executive vice president, with $14.4 million in pay, including $12.4 million in option profit, ranking ninth.

•Sharon D. Fiehler, executive vice president, with $13.6 million in pay, including option profit of $11.6 million. Fiehler was in 10th place.

Other executives in the top 10 included:

•David N. Farr, chairman, president and chief executive of Emerson, who took in $19.9 million, including $14.1 million in stock that vested last year. Farr ranked sixth in the Post-Dispatch survey.

•George Paz, chairman, president and chief executive of Express Scripts Inc., whose $18.4 million in pay included $14.9 million in stock option profits and an incentive bonus of $2.1 million. Paz came in seventh.

•Steven F. Leer, chairman and chief executive of Arch Coal Inc., who was paid $16.5 million, including $9.7 million in stock option profits and $4.36 million in shares that vested last year. Leer was eighth.

Notably absent from the top 10 are executives of Anheuser-Busch Cos., which is being acquired by Belgian beer giant InBev. W. Randolph Baker, chief financial officer, ranked 21st with $7.3 million in pay last year, and August A. Busch IV, chief executive, came in 33rd with $4.95 million in pay.

However, the Busch executives stand to make millions more in the buyout from severance, bonuses, the acceleration of stock awards and retirement settlements.

Documents filed in August disclosed potential payouts of about $125 million for Busch IV; $75 million for Baker; $50 million for Douglas J. Muhleman, vice president of brewing and technology; and $36.5 million for Michael J. Owens, vice president of business operations.

jerristroud@post-dispatch.com | 314-340-8384

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