It’s not the biggest cruise operator in the world, but Royal Caribbean Cruises can boast plenty of superlatives: It operates the largest individual cruise line by passenger capacity, sails the world’s largest cruise ships, and — last year at least — employed the most highly compensated CEO.

Richard Fain, chairman and CEO of the Miami-based company, received $10.4 million in total compensation in 2016. That puts him at the top of the list of chief executives at publicly traded cruise companies. Arnold Donald, president and CEO of cruise giant Carnival Corp., made nearly $9.9 million. And the third-highest earner with more than $4.6 million was Stein Kruse, CEO of Holland America Group, a unit within Carnival Corp.

Frank Del Rio, chairman and CEO of Norwegian Cruise Line Holdings, came in closer to the bottom of the 2016 list with total compensation of $2.9 million after hefty stock and option awards brought his total in 2015 to nearly $32 million.

Total compensation includes base salary, which is usually a small percent of the package, as well as stock awards, bonuses, incentive pay, and additional compensation such as coverage of an auto allowance, health insurance costs, and tax preparation.

The cruise industry saw record-breaking numbers last year, with 24.7 million people sailing and the three biggest operators — Royal Caribbean Cruises, Carnival Corp., and Norwegian Cruise Line Holdings — posting increases in revenues and profits.

But the stock price didn’t always move with the results. Luis Navas, head of the U.S. practice at Global Governance Advisors and a senior partner in the professional advisory firm, said total shareholder returns were down 27 percent at Norwegian and 17 percent at Royal Caribbean for the year. At Carnival, the stock was up about 5 percent.

Navas said more cruise passengers don’t necessarily translate to Wall Street success. Analysts, he said are looking forward, not backwards.

“It’s tough being a public company in the sense that, taking the cruise line business, you think it’s all about tourism,” Navas said. “It’s not just tourism. Is there war breaking out in areas that we cruise in? What’s happening to oil prices? What’s happening to the cost of production of a cruise boat. Frankly, what’s Trump saying today?”

Cruise companies have also faced questions from analysts about their growing presence in China, where pricing stumbled last year amid increased supply.

“Being a publicly traded company, you are impacted by so many different variables, many of which they have no control over,” Navas said.

Skift examined filings with the U.S. Securities and Exchange Commission for the three major publicly traded cruise companies — Carnival Corp., Royal Caribbean Cruises, and Norwegian Cruise Line Holdings. Included are CEOs of parent companies, groups within those companies, or individual brands as long as the operators include their salaries on regulatory documents.

Royal Caribbean Cruises

Royal Caribbean Cruises, the world’s second-largest cruise operator, saw revenues increase from $8.3 billion to $8.5 billion in 2016, while profits jumped from $665 million to $1.3 billion. In the filing, the company names other highlights, including record adjusted earnings per share; a ratings outlook improvement to positive from stable; and the sale of 51 percent of the Pullmantur brand and formation of a joint venture to operate it.

“2016 was a strong year for the company both operationally and financially, culminating in another consecutive year of record earnings despite a challenging geopolitical and foreign currency environment,” the filing said.

Base salaries for Fain and two other CEOs in the company — Michael Bayley at the Royal Caribbean International brand and Lisa Lutoff-Perlo at Celebrity Cruises — increased as the company tried to move them closer to the market median. Fain’s salary increased about 10 percent to $1.1 million.

Performance-based incentives were tied to financial metrics — adjusted earnings per share and operating income for brands — as well as indicators including yields; costs; guest satisfaction; employee engagement; safety security, health, and environment; and customer centricity. Executives generally were paid above the target for performance-based incentives.

Fain’s total compensation for 2016 was about 11 percent higher than in 2015 and included increases in every category. He has been in his job since 1988, and Navas said executives are often rewarded for years of service. The company also says that tenure is a factor in adjusting base salaries.

“You will find that right or wrong, individuals that are in positions for a longer tenure usually will have higher pay,” Navas said. “And I think that’s kind of a changing paradigm going forward. I think nowadays, regardless if you’ve been there 10, 15, [or] one year, it’s more related to what’s the market and how have you performed.

In a statement, Royal Caribbean Cruises global chief communications officer Rob Zeiger said executive compensation was based on measured performance and the approach was validated with the board, its compensation committee, outside experts, and shareholders.

“RCL’s management team has delivered results that have exceeded targets, contributing to long-term stock performance that outpaces both the travel sector and the S&P 500,” he said. “We’re proud of Richard’s leadership. He earns his paycheck.”

Carnival Corporation

Carnival Corp. is a much larger company than Royal Caribbean. Carnival includes nine brands, more than 100 ships, and has a market capitalization of  $46.7 billion, compared to Royal Caribbean’s market cap of about $24 billion.

Revenues grew from $15.7 billion in fiscal 2015 to $16.3 billion in fiscal 2016, with profits up from $1.75 billion to $2.8 billion.

The operator said other successes included receiving credit rating upgrades, returning $3.3 billion to shareholders, and increasing operating income by 20 percent to more than  $3 billion.

That increase in operating income is important for compensation: Bonuses are tied to corporation-wide operating income and brand-specific operating income, depending on the executive, as well as health, environment, safety, and security objectives.

The salary for Donald, CEO since 2013, stayed the same at $1 million. Total direct compensation — salary, bonus, and equity grants combined — dropped slightly, but Donald’s total compensation package was up 5.4 percent to almost $9.9 million.

“Mr. Donald’s total direct compensation decreased slightly by 0.3% in fiscal 2016, due to a lower bonus pay-out in fiscal 2016 driven by more challenging performance targets and payout curve under the Management Incentive Plan,” the SEC filing says.

Stein Kruse, CEO of Holland America Group, was an exception at the company: his annual bonus increased 9.5 percent in fiscal 2016 “driven by improved relative performance to target” from the previous year. His total compensation increased 16 percent to $4.65 million, though his base salary of $825,000 was unchanged.

Costa Group CEO Michael Thamm, who is paid in euros, also made the same base salary as the previous year. Because of exchange rate fluctuations, the U.S. dollar amount was slightly lower this year, $777,000. Because of higher stock awards, his total compensation increased slightly to $3.5 million.

Those groups include multiple cruise lines; individual brands have presidents at the top but not CEOs.

Navas said that at Carnival, total shareholder returns of nearly 5 percent are nicely in line with the bump in total compensation for the parent company’s chief executive.

“People will look at that and say they really tried to mimic the health of the company,” he said. “I don’t think you’re going to have any shareholders who would be upset with that.”

Carnival Corp. chief communications officer Roger Frizzell said in an email that the company has been working “diligently” during the last four years to better tie executive pay to shareholders based on performance.

“So we expected alignment between [total shareholder return] and our senior executives’ total comp over the last term — but not the exact percentages,” he said.

Norwegian Cruise Line Holdings

Frank Del Rio, the chairman and CEO of Norwegian Cruise Line Holdings, has the highest base salary among his peers at $1.5 million. But his total compensation is among the lowest of all nine executives included in the ranking. The company is the smallest of the three publicly traded lines, with three brands and a market cap of $11.6 billion.

Somewhat unusually, Del Rio’s salary was actually cut, from more than $1.8 million in 2015. That cut came as part of his renegotiated employment agreement in August 2015; he unexpectedly became president and CEO in January of 2015.

Del Rio also has the largest drop in total compensation from 2015 to 2016 — almost $32 million to $2.9 million — because of a “special one-time, front-loaded, performance-based equity award” in 2015. He received $10.2 million in stock awards and $17.7 million in option awards.

Shareholders told the company the amount of equity was too large; Del Rio was not awarded any new equity last year.

Navas said that decision was sound, especially considering the stock was down.

“That’s pretty good governance practice,” he said. A spokeswoman declined to comment on compensation.

Executives also did not receive cash bonuses because the company did not meet “rigorous” targets tied to adjust earnings per share and adjusted return on invested capital metrics.

Still, Norwegian had a profitable year: Revenue was up 12 percent to $4.9 billion and profits increased from $427 million to $633 million in 2016. Diluted earnings per share jumped from $1.86 to $2.78.

Within the company, Robert Binder saw his salary increased from $500,000 to $650,000 late in the year when he was promoted to president and CEO of Oceania Cruises.  He is also vice chairman of Oceania Cruises and Regent Seven Seas Cruises. His total compensation grew significantly to almost $3.8 million.

Andy Stuart, president and CEO of Norwegian Cruise Line, also earned a salary of $650,000; that was unchanged from the previous year. His total compensation fell more than 14 percent to $2.8 million.

BEST-PAID CEOS OF PUBLIC CRUISE COMPANIES

CEOCRUISE COMPANY2014 Compensation2015 Compensation2016 Compensation
Richard FainRoyal Caribbean Cruises$12,013,878$9,388,569$10,405,684
Arnold DonaldCarnival Corporation$8,730,512$9,373,908$9,881,820
Stein KruseHolland America Group**N/A$4,001,725$4,659,159
Michael BayleyRoyal Caribbean International*$4,408,650$3,213,305$3,866,773
Robert BinderOceania Cruises***N/A$1,760,457$3,797,269
Michael ThammCosta Group**$6,484,683$3,393,801$3,524,340
Frank Del RioNorwegian Cruise Line Holdings$2,130,906$31,910,348$2,917,824
Andrew StuartNorwegian Cruise Line****$1,830,164$3,307,267$2,824,328
Lisa Lutoff-PerloCelebrity Cruises*N/AN/A$2,310,898

Source: U.S. Securities and Exchange Commission Filings
* Royal Caribbean International and Celebrity Cruises are part of Royal Caribbean Cruises.
** Holland America Group and Costa Group are part of Carnival Corp. Thamm was paid in euros; the amount was converted to U.S. dollars at the exchange rate of 1 euro per $1.11.

*** Binder is also vice chairman of Oceania Cruises and Regent Seven Seas Cruises, part of Norwegian Cruise Line Holdings.

**** Norwegian Cruise Line is part of Norwegian Cruise Line Holdings.

 

Photo Credit: Royal Caribbean Cruises CEO Richard Fain was the most highly compensated CEO among publicly traded cruise companies in 2016. In this photo, he is shown at a cruise industry conference. JD Lasica / Flickr