Nifty 50: L.A.'s top executives together outearn entire nations.

Nifty 50: L.A.'s top executives together outearn entire nations Last year was a very good year for O.C. Davis, the chairman and chief executive of a gas pipeline company that was acquired by Occidental Petroleum. Between regular pay and acquisition profits, Davis netted more than $7.5 million, making him the city's highest paid public executive in 1986.

Davis is in rich company, too. He and 49 others make up a core group of local millionaires who took home an average of $2.2 million each in 1986. (Los Angeles Business Journal's 1987 directory of top-paid executives starts on page 22 of this edition.) They represent Los Angeles' most powerful industries -- finance, entertainment, oilm, aerospace,health care and retailing and their collective pay total an astonishing $110 million. That`s about 12 percent of the gross domestic product of the African country of Botswana.

But says MCA Vice President Irving Azoff of his $1.87 million stipend: "I just think l'm underpaid."

Clearly, pay is in the eye of the beholder.

This year's list includes a number of new names because of the effects of severance agreements and stock grants. Top-ranked Davis, for example, is on the list for the first time. So is Gerald D. Barrone, former president and chief operating officer of Citadel Holding Corp., parent of $3 billion (assets) Fidelity Federal Savings and Loan. Both broke onto the list with handsome severance agreements, which for Davis included a $2.2 million payout from his supplemental benefit plan and a $1 million distribution from his MidCon retirement plan. Salaries: Top 50

Barrone made the bulk of his package by exercising $5.7 million in stock options before the parted company with Glendale-based Citadel and joined $9.5 billion (assets) Coast Savings in downtown Los Angeles.

Many of the others are familiar faces. Sidney Jay Sheinberg, president and chief operating officer of Universal City-based MCA Inc., for example, earned $6.1 million in 1986-- an amount roughly equivalent to the gross domestic product of the island nation of Anguilla, according to the Central Intelligence Agency's most recent World Fact Book-- making him the third most highly paid public company executive in Los Angeles (He was also third last year.)

Sanford Sigoloff, chairman and chief executive of Wickes Cos., who ranked fourth in 1985 and second in 1986, came in a relatively distant 13th this year, with a total package worth more than $2.75 million.

Together, 25 of this year's top 50 were on last year's, and 22 of these executive appreared on the list the year before.

The factors that drove compensation changed this year. In years parst, exercising stock options put a good number of the top 50 on the list, but stock option gains made up a smaller part of compensation last year.

"Many people did not exercise their stock options because of the tax bill," says Fred Whittlesey, compensation consultant with Mercer-Meidinger-Hansen in Los Angeles.

Whittlesey says executives were defering whatever pay they could and waiting for lower tax rates to start in 1987 and 1988. What the executives could not control, though, were actual stock grants. These grants are payout for long-term performance.

Four MCA executives including Sheinberg, for example, took home the bulk of their annual payments in stock. Sheinberg was given $5.5 million worth of MCA's shares; Azoff, $1.2 million; Frank Price, another MCA vice president, got $2.4 millllion in MCA stock; while executive vice president Thomas Wertheimer received nearly $1.1 million.

Three Northrop executives, including Thomas Jones, chairman and chief executive, collectively took home an estimated $10 million as a result of stock payments. (Northrop disclosed the vested stock payments in three-year blocks, but would not break out the precise 1986 numbers. We divided the totals by three.)

A Northrop spokesman points out, however, that these grants were given for performance that spanned, for some, a decade.

The Los Angeles Business Journal similarly estimated the value of stock grants made to executives of Beverly Enterprises, Ceasars World and National Medical Enterprises. The actual numbers of shares were noted in corporate proxy statements.

We calculated an average value by dividing the 52-week stock range by two, and multiplying by the number of shares granted. It is not precise, but Whittlesey says it is the best estimate possible when actual dates and values are not available.

Other compensation trends have remained stable, Whittlesey notes. He says companies are still attempting to pay for performance, which explains increased emphasis on stock option and stock grant programs.

Future trends may include a greater emphasis on cash payments, though, says Carl D. Jacobs, manager of Sibson & Co.'s Los Angeles office. He says this is another many forms of tax-favored compensation.

Interestingy, while L.A.'s top 50 seem to have done well, the average chief executive in the 11 Western states is actually underpaid by national standards, according to Ronald Gerevas, managing partners of the Heidrick & Struggles Los Angeles office. Gerevas says the national executive search firm has just finished a study of annual compensation trends that concludes that, in 1986, Western chief executives at Fortune 1000 companies received an average of $543,000, compared to a national average of $590,000 for CEOs at the nation's service firms.