By Bob Tita
Eaton Corp. PLC. (ETN) reported Friday that Chairman and Chief
Executive Alexander Cutler's 2012 compensation increased 50% as a
result of an $11.4 million tax benefit provided by the company, in
connection with its purchase of Cooper Industries PLC.
Eaton, which had been headquartered in Cleveland, switched its
incorporation last year to Ireland, where Cooper had been
registered. As an expatriating U.S. company, Eaton executives were
subject to U.S. excise taxes on the value of their unvested shares
of restricted Eaton stock and unexercised stock options.
For Mr. Cutler, the one-time taxes amounted to $11.4 million,
even though he has yet to profit from the stock or the options
being taxed. The diversified industrial company said it covered Mr.
Cutler's taxes and those levied on other insiders and directors to
avoid putting them at a disadvantage to other investors who were
not subject to the excise taxes, according to a regulatory filing
with the U.S. Securities and Exchange Commission.
Once the stock vests and the options are exercised, Mr. Cutler
and other executives will be responsible for paying any applicable
federal and state taxes on the gains.
Mr. Cutler's salary, bonuses, stock and option awards and other
types of compensation totaled $20.4 million in 2012, compared with
$13.6 million in 2011. Excluding the $11.4 million tax payment by
the company, his compensation dropped 34% from 2011 to about $9
million.
In most compensation categories, Mr. Cutler's compensation was
either flat or declined. His $1.2 million base salary was roughly
the same as in 2011. His performance-based incentive bonuses
plunged 63% to $1.65 million because of a lack of long-term
performance bonuses in 2012. In 2011, Mr. Cutler received both
short-term and long-term performance bonuses.
Mr. Cutler, 61 years old and CEO of Eaton since 2000, was
awarded stock and options worth $4.14 million on the day they were
granted. Mr. Cutler also received $21.6 million from exercising
stock options and vesting 230,932 shares of restricted stock
granted in 2009, 2010 and 2011. The $21.6 million gain was not
included in his 2012 compensation total.
Mr. Cutler's executive perquisites totaled $103,195 and included
$26,200 for financial planning, $50,750 for personal use of the
company's aircraft and $16,245 for company-paid life insurance
coverage.
The value of Mr. Cutler's pension and other deferred
compensation dropped to $1.85 million from $3.11 million in
2011.
Eaton's business lines include electrical equipment, hydraulic
systems, truck transmissions and aircraft systems and components.
The company agreed to buy lighting and electrical products
manufacturer Cooper in May 2012 for $11.8 billion in a cash and
stock deal. Cooper shareholders received $72 a share in cash and
stock in Eaton. That was a 29% premium to Cooper's stock price
before the deal was announced.
Eaton closed down 0.95%, or 60 cents, at $62.57 a share.
--Write to Bob Tita at robert.tita@dowjones.com
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