Recently retired Merck & Co. CEO Richard Clark saw a 65 percent increase in total compensation last year compared with 2009, when stock price fluctuations reduced stock and option awards given to the drugmaker's top executives.
Clark, 65, received a compensation package valued at $17.9 million, according to an Associated Press calculation of figures disclosed in a regulatory filing that the Whitehouse Station, N.J., company made Wednesday after markets closed.
Clark retired as CEO on Jan. 1, 2011, before reaching Merck's mandatory retirement age in March. But he remains company chairman, a title he has held since 2007. He was replaced as CEO by Kenneth C. Frazier.
Clark's 2010 pay included a 3 percent increase in salary to nearly $1.9 million and a 16 percent increase in performance-related bonus to $3.3 million. But the bulk of his compensation came from stock and option awards, the combined total value of which more than doubled to about $12.7 million.
A Merck spokesman said the company switched last year to a new method for determining these awards, based in part on their dollar value and not the number of stock or options awarded.
Clark also received $54,183 in other compensation last year, mostly for a company car and driver.
The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive's stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.
Merck said its board gave Clark a salary increase last year "to reflect his accomplishments, contributions and strong leadership during 2009, as well as the fact that (his) base salary had not been adjusted since 2008."
Clark steered Merck through its $49.6 billion acquisition of Schering-Plough in 2009. The deal made Merck the world's second-biggest drugmaker and gave it product diversity and bolstered its portfolio of drugs in late-stage development.
Clark joined Merck in 1972 and had served as CEO since May 2005. Frazier, 56, received compensation totaling $7.6 million in 2010, when he served part of the year as president.
The drugmaker said it also considered company performance in determining 2010 compensation. It noted, among several bullet points, that Merck's adjusted earnings last year exceeded internal targets and the company launched five new drugs. Adjusted earnings typically exclude one-time items.
The company also said it maintained sales momentum in a challenging environment and despite generic competition for the blood pressure drugs Cozaar and Hyzaar.
Merck's revenue climbed 68 percent to $45.99 billion last year, thanks to the addition of Schering-Plough products. But the company's net income sank 93 percent in 2010 to $861 million from $12.9 billion, as research and development and marketing and administrative expenses climbed sharply.
The maker of the asthma and allergy drug Singulair said pricing pressures from the U.S. health care overhaul and European government programs had increased. It lost $531 million in the fourth quarter due to $3.9 billion in charges.
Like other major pharmaceutical companies, Merck also dealt with competition from generic drugmakers, which helped push down total prescription drug revenue 2 percent in the fourth quarter.
Merck shares fell 1 percent during the year to close 2010 at $36.04. In contrast, the Stand & Poor's 500 index climbed 12.8 percent.
The company's annual meeting will be held May 24 at Raritan Valley Community College in North Branch, N.J.