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Josh S. Weston

We don’t go into any business unless we have as a silent marketing partner, a powerful third force,” says Josh S. Weston, 63, chairman and CEO of Automatic Data Processing. That third force usually manifests itself in well-defined regulations that govern ADP clients. In ADP’s biggest business-payroll processing-Internal Revenue Service statutes and federal wage and hour laws keep clients on the straight and narrow. For brokerage clients, the New York Stock Exchange and the SEC play watchdog.

In the fiscal year ended June 30, Roseland, NJ-based ADP posted net earnings of $256 million, up 13 percent from the year before. Revenues jumped 10 percent to $1.94 billion. Not bad for a company with modest tangible assets: ADP has $450 million in cash and a market valuation of $6 billion, of which it owns $1 billion itself. Clearly, the force is with Weston and his 20,000 associates, as ADP’s employees are called.

Many of those associates spend their days processing the paychecks of 15 million employees of client companies and also filing quarterly tax returns for 175,000 business clients with 2,000 government agencies. In 1991, such employer services raked in $1 billion, almost 60 percent of ADP’s total revenues.

Each of ADP’s two main competitors in payroll processing-Control Data and Paychex-have only a fifth of the company’s business in this area. Since ADP’s market share amounts to 10 percent of the nation’s estimated 150 million private sector employees, there’s still room for more business. Hence the May 1992 acquisition of San Francisco, CA-based BankAmerica’s 17,000 payroll clients, which shepherded 2.5 million new paycheck recipients into the ADP fold.

Founded in 1949, ADP grabbed a large corner of the market 20 years later, when the U.S. Department of Justice forced IBM out of the service industry. Weston, who has been ADP’s CEO for the last 10 years, signed on as vice president in 1970, after 18 years with Popular Club Plan, a mail-order business.

“Josh Weston runs ADP exceptionally well, with incredible attention to detail,” says Stephen McClellan, an analyst with Merrill Lynch. “They’ve outflanked and outclassed their competition.”

As might be expected of a CEO whose business is paychecks, Weston takes a stand on CEO compensation: “It should be linked directly to the long-term performance of the company’s stock,” he says, “not to a tricky algorithm.

“Executive stock options should only be worth something if the stock goes up. To me, that’s the most significant single leverage factor, because it deals with the result. If everything we do doesn’t make our outside shareholders feel good, the fact that we had an internal algorithm that said we did a good job-well, we can forget about it, because the stock was, say, $8, and it’s still $8.”

Weston last year took home $879,000 and received options for 466,000 shares of ADP stock, which currently trades at $45 a share.


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