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    Nuance CEO’s pay puts spotlight back on executive compensation

    What does it take to become the most overpaid executive in Massachusetts? Or, more to the point, how much does it take?

    The answer is a little bit north of $29 million. That’s how much the Burlington speech recognition company Nuance Communications Inc. paid its chief executive, Paul Ricci, last year.

    Ricci earned more than anyone else on my unofficial list of 10 Massachusetts executives who made over $10 million apiece last year. But he doesn’t get my top vote in any ranking of overpaid local executives simply by making the most money.


    Ricci has been earning really big bucks for a long time, a point of growing controversy among Nuance stockholders. In fact, he made a whopping $87 million in total compensation for the past three years. Over that period, Nuance shares lost 16 percent of their value.

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    That disconnect between Nuance’s recent performance and the chief executive’s compensation makes last year’s $29 million pay package an especially sore subject.

    Ricci wasn’t just the highest paid chief executive of a Massachusetts public company — he ran circles around the rest of the field. Carol Meyrowitz, the chief executive of Framingham retailer TJX Cos., ranked a distant second behind Ricci by earning $19.1 million last year.

    Other traditional top earners among Massachusetts chief executives, whom I followed with the help of ISS ExecComp Analytics, all prospered again in 2013. Raytheon Co.’s Bill Swanson made $16.8 million (and $48.3 million over the past three years), Jay Hooley of State Street Corp. earned $15.8 million, and Jeffrey Leiden of Vertex Pharmaceuticals Inc. pulled down $13.1 million. EMC Corp. chief Joe Tucci made $12.6 million and American Tower Corp. CEO James Taiclet Jr. earned $12.2 million.

    The Boston investment firm Affiliated Managers Group Inc. has not yet reported its 2013 executive compensation, but the company paid CEO Sean Healey $19.8 million the previous year. Biogen Idec, which became the state’s most valuable public company last year, has also not reported 2013 pay figures.


    This is a good place to acknowledge that executive compensation reports are packed with a lot of fuzzy numbers. Some stock awards depend on future performance and the value assigned to options presumes share appreciation in the years ahead.

    But those reports still give you a pretty good idea how top executives at public companies are paid. In my experience, executive pay plans reduced by a sinking stock price or other misfortune usually trigger another big round of awards in the future.

    At Nuance, rumblings about Ricci’s compensation have led to some changes. More of his pay package is now dependent on stock to be awarded only if performance targets are met in the future. But the sheer amount of money in play has grown even larger. Nuance declined to comment on compensation.

    Despite the compensation controversy, many people who follow Nuance support Ricci. They point out he built Nuance nearly from scratch into the most important technology company dedicated to speech recognition by computers. Its was an important contributor to the creation of Siri, the digital assistant that answers questions spoken into Apple’s iPhone.

    Analysts I spoke with said Nuance must come through on forecasts for improved business over the next year. Shareholders will stop talking about Ricci’s pay if that happens, they say. Disappointing results will rub critics raw. Did I mention activist investor Carl Icahn has acquired more than 20 percent of the company’s stock?


    “Were coming to a fork in the road,” says analyst Daniel Ives at FBR Capital Markets. “Over the next two to four quarters, its either a success or a lot more struggles again.”

    Paul Ricci certainly built Nuance into the industry leader it is today. But what’s a fair payday for that?

    Consider this comparison: Ricci took over as chief executive at Nuance in the summer of 2000, five months before Martin Roper was named CEO of Boston Beer Co., the maker of Sam Adams.

    Over the next 13 years, Nuance earned a sizzling average of 31 percent annually. But Boston Beer nearly matched that performance, gaining 29 percent a year. Today, Nuance commands a stock market value of $5 billion and Boston Beer is worth $3 billion — not too far apart.

    But all those close comparisons end when it comes to executive pay. Roper made $1.5 million in total compensation last year — about 5 cents on the dollar of Ricci’s pay package. Over the past three years, Roper earned about $3.5 million.

    So whose paycheck looks out of whack to you?

    Steven Syre is a Globe columnist. He can be reached at