Incoming Lorillard CEO Kessler made $13M in '11

Lorillard Inc. CEO Murray Kessler received a pay package valued at $13 million in his first full year on the job with the nation's third-biggest tobacco company, according to an Associated Press analysis of a regulatory filing.

The pay package came in a year when the maker of Newport, Kent, True and Maverick cigarettes saw its profit rise nearly 8 percent to $1.11 billion and its revenue excluding excise taxes increased about 10 percent to $4.45 billion. Shipments rose nearly 7 percent to more than 40 billion cigarettes, compared with an estimated industry decline of 3.5 percent.

The compensation deal was disclosed in an annual proxy filing with the Securities and Exchange Commission filed Thursday.

Kessler, who joined the company in September 2010, received a salary of $1.2 million and a $3.5 million performance-based bonus in fiscal 2011. The value of his stock options and stock awards totaled $8.3 million.

The 52-year-old, who also serves as board chairman, received $3.7 million for 2010.

Lorillard also announced that it will hold its annual meeting May 17 in its headquarters city of Greensboro, N.C., where shareholders will elect two directors to its board. Lorillard, the oldest continuously operating U.S. tobacco company, spun off from Loews Corp. in 2008.

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.