Massey Energy CEO's Compensation Drops 17 Percent

The Associated Press compensation formula is designed to isolate the value the company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.

The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission, which reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.

According to Massey Energy's filing, the compensation committee benchmarks its executive pay practices against a group of companies that includes Arch Coal Inc., El Paso Corp. and Steel Dynamics Inc.

The committee also has established a guideline for Blankenship to own shares having a value of five times his base salary in order to align his interests with those of shareholders.

In 2008, Massey earned $56.2 million or 68 cents per share, compared with $94.1 million, or $1.17 per share, the previous year. Last year's results included a pre-tax litigation charge of $250.1 million.