The Dons of D.R. Horton

The housing boom was very good to the top executives at D.R. Horton, the nation’s largest homebuilder with $15 billion in revenue a year ago.

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Since 2001, Chairman Donald Horton and CEO Donald Tomnitz have each received $44 million in bonuses from the Fort Worth-based builder, according to company filings with the SEC. That includes a total of nearly $25 million apiece in the company’s 2005 and 2006 fiscal years.

In fact, for a good view of the Matterhorn heights residential real estate reached, just chart Don Horton’s annual bonuses for the past decade:

1996		$165,283
1997		$235,000
1998		$540,000
1999		$1,611,600
2000		$850,367
2001		$2,000,000
2002		$3,266,194
2003		$5,499,123
2004		$8,320,134
2005		$12,824,804
2006		$12,120,909

This fiscal year, which ended Sept. 30, will be a bust for D.R. Horton. The company wrote off $850 million for what it calls “inventory impairments” in its third quarter, reporting a net loss of $823 million. Fourth-quarter results, expected later this month, should also be grim.But that doesnít mean the two Dons won’t show bonus compensation when the company reveals their 2007 pay in the annual proxy statement, expected in December.

D.R. Horton awards and pays its top executive bonuses quarterly (based on pre-tax income), just like some mortgage lenders. Business was slowing in first six months of the fiscal year, but Horton reported profits.

Executive salaries at Horton are relatively modest. Don Horton’s salary has been $400,000 for the past few years; Tomnitz earns $300,000. Don Horton also owns 27 million shares (8.6%) of company stock.

D.R. Horton has just seven board members: Horton, Tomnitz, another company executive, Bill Wheat, and four outsiders. The outsiders make up the compensation committee. Bradley Anderson is an executive with real estate broker CB Richard Ellis, Michael Buchanan is a former banker, Michael Hewatt is a CPA with Hewatt & Associates, and Richard Galland is the former CEO of Fina.

Galland, an attorney, may be one of the more unusual directors of an American publicly held firm. A Horton board member since 1992, he was 90 years old at the time of the company’s last proxy statement.

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