Author: Sonya Hubbard

Just as the summer horizon would seem uncharacteristically empty without dandelions, it’s hard to imagine the M & A landscape without shareholder lawsuits.

Thus, it’s no real surprise that after SAP America, a subsidiary of SAP AG (SAP) announced May 12 that that it was acquiring Sybase, Inc. (SY) in a $5.8 billion transaction, a number of lawsuits sprang up to challenge the deal and block the merger.  (Michelle wrote about the deal recently here.)

Litigation can be interesting, to be sure, but we’re more interested in the big payouts that Sybase disclosed in the SC 14D9 form that it filed May 26.

With respect to common stock, the filing notes that Sybase’s officers and directors will get the same deal as other shareholders, stating:

If the directors and executive officers tender all of the 191,595 Shares owned by them as of May 25, 2010 (which number of Shares excludes restricted Shares and options to purchase Shares, which are addressed in the succeeding paragraph below)…, the directors and executive officers will receive an aggregate of $12,453,675 in cash…. to the knowledge of Sybase, all of Sybase’s directors or executive officers currently intend to tender all of their Shares for purchase pursuant to the Offer.

There’s no way to easily summarize how the restricted stock awards will be treated (it’s on p. 4 if you’re interested), but the filing adds that “As of May 25, 2010, an aggregate of 1,089,772 unvested Shares underlying restricted stock awards were held by the directors and executive officers of Sybase.”

A chart also shows that if Sybase’s leaders cash out their options, stock appreciation rights, and restricted stock awards, CEO John Chen will receive more than $97 million in total cash consideration for his equity interests. The other named directors and executives stand to collect between $2.69 million to $18.5 million each. And because these sums are in addition to any payments triggered by the various change in control scenarios, the actual payouts could be much higher.

Sybase contends that SAP’s offer to pay $65.00 in cash per share for its common stock is fair.  In a March 13 filing, Sybase noted that “the per share purchase price represents a 44% premium over the three-month average stock price of Sybase.”

However, the various disgruntled shareholder groups don’t seem convinced. Claims to block the merger allege that Sybase did not properly “[shop] for a deal that would provide better value for shareholders” or that there were “potential breaches of fiduciary duty and other violations concerning the transaction’s approval by Sybase’s board of directors.” Yet another firm claims that “the merger agreement includes a $150 million termination fee and a clause prohibiting the Board from discussing or seeking any superior proposals. Sybase has also granted SAP a “top-up” option to bring SAP’s ownership of the Company’s stock to one share more than 90% to help ensure the completion of the merger.”

We’ll leave it to the attorneys to sort these disputes out. Meanwhile, fair or not, the deal certainly promises big bucks for Sybase executives.

Image source: lightmatter via Flickr

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If Charles Dickens were writing about the proxy that Dell, Inc. (DELL) filed yesterday, he might have reworked his classic opening paragraph to read, “It was the best of proxies, it was the worst of proxies, it was the age of wisdom, it was the age of foolishness…” (we’ll spare you the rest so that we can get to the point).

We’ve written about Dell a lot over the years, driven by such actions as the company’s paying Michael Dell more than $4 million to compensate him for personal travel on his personal jet, or the company paying nearly $1 million in 2006 to provide Dell with personal and residential security. (That last number actually increased; in 2009, the company spent $1,164,625 on Dell’s personal security.)

So what did we find in this year’s proxy?

Here’s the section that earns true credit (although, admittedly, “the best of proxies” is an overstatement).  The proxy states:

“In prior years, Dell provided personal, residential and business related security protection to Mr. Dell. Effective for Fiscal 2010, Dell will only provide Mr. Dell with business related security protection.”

That decision, which will save almost $1.2 million, may buoy investors’ spirits a bit after the gross margins in last week’s report disappointed analysts.  In addition, Michael Dell didn’t take a bonus, stock awards, options, etc. in FY 2010, and his “Other” compensation (where perks are usually disclosed) was a paltry $13,623.

But there are examples of other expenditures that do not deserve praise.  The company paid Dell almost $2.6 million so he could use his personal jet (although that’s an improvement from last year), and it’s hard to understand how Stephen Felice, president – consumer and small and medium business division, racked up “expatriate expenses” of $1,326,728 in one year.  (Those aren’t a one-time expense, either.  In 2009 Dell spent $707,094 on Felice’s expatriate expenses; in 2008, the number was $1,567,625.)  And, of course, one can’t ignore that at the same time Dell’s money is flowing so freely on expenses for the NEOs, it acknowledged on May 26 that it’s cutting more jobs.

Finally, we can’t help but poke at one of the reasons Dell gives for opposing a proposal to give shareholders an advisory “say on pay.”  At the top of p. 25, the proxy states:

“It is widely expected that, within the year, Congress will pass new legislation requiring such a non-binding vote on executive compensation. Management believes it is in the best interest of Dell and its stockholders to await the legislation and not create our own policy only to possibly have to change the policy to match the new legislation.”

Seriously? The company is afraid of having to tweak a policy? Perhaps we have more faith in Dell’s lawyers than the company’s board does, but we bet they’re up to the job.  Like Dickens, all they have to do is pick up a pen and start writing.

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June 15 is going to be a very expensive day for Weatherford International Ltd. (WFT), a Swiss-based multinational company that provides products and services for oil and natural gas wells in more than 100 countries.  That’s the day when two top executives, Keith Morley and Jessica Arbarca, will leave the company but substantially increase their personal net worth.

Morley, the departing SVP – Well Construction & Operations, joined the company in 2001. Arbarca joined the company in 1996 and worked her way up to the position of Vice President — Accounting and Chief Accounting Officer.

The company filed a short 8-K on May 24, 2010 to announce the upcoming departures, name the executives’ successors, and note this one-sentence disclosure:

“In connection with Mr. Morley’s and Ms. Abarca’s exercise of their employment agreements, we anticipate recording an expense of $12.0 million in the quarter ending June 30, 2010 and making cash consideration payments of $24.5 million in the quarter ending December 31, 2010.”

Both executives signed new employment agreements with the company on December 31, 2009. One day later, on January 1, 2010, the company adopted a new Supplemental Executive Retirement Plan. In the 8-K that the company filed on New Year’s Eve, the filing stated that the new agreements contained changes pertaining to the company’s redomestication from Bermuda to Switzerland and revisions to ensure that the company’s plans complied with the Internal Revenue Code.

The company hasn’t yet disclosed how much of the $24.5 million will go to Morley and how much will go to Arbarca. However, Weatherford’s May 13, 2010 proxy discloses that Morley was eligible to receive nearly $17.5 million if he left the company for “good reason” (Arbarca is an executive, but not a NEO; thus, numbers for her are not stated in the filing.)  The company further noted that “…the freezing of the SERP may constitute ‘good reason’ for five of our executive officers, including Dr. Duroc-Danner, Mr. Becnel and Mr. Morley, to terminate their employment under their employment agreements.” Of course, it also added, “The actual amounts to be paid out can only be determined at the time of, and depend upon the circumstances surrounding, such named executive officer’s termination.”

Regardless of the final numbers, though, the size of their exit packages is surely a bitter pill for the thousands of employees who have been laid off in the past few years with comparatively tiny severance packages.

Image source: Photos8.com via Flickr

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We don’t watch American Idol, but we know that the two-part season finale starts tonight! We also know it’s also been an exciting week for Robert F. X. Sillerman, who founded the company that controls the rights to the show.

Sillerman, CKX, Inc.’s (CKXE) founder, former CEO, Chairman of the Board, and largest shareholder, resigned on May 6 and announced his immediate departure from the company. All we knew about his plans at the time were that 1) he planned to work as a consultant for CKX; and 2) he’s thinking about buying the company. (Besides American Idol, CKX also controls the rights to use the images of Elvis Presley and Muhammad Ali.)

On May 24, CKX filed an 8-K and May 22 letter with the SEC that set out the terms of Sillerman’s departure, which it declared a “constructive termination without cause.”

The biggest chunk will be a severance check for $3,316,749 that Sillerman will get around the new year. He also gets $95,721 for unused vacation and up to $25,000 to pay the legal fees he incurred to negotiate the agreements. CKX lifted stock restrictions on Sillerman’s options, thus enabling him to exercise those at any time. The company will pay Sillerman $25,000 annually for three years, and $10,000 annually for life after that to compensate him for benefits promised in his 2009 employment agreement. He also gets

“…continued access to up to four [non-transferrable] tickets for up to ten Company produced events per year, subject to their availability as determined by the Company on a case-by-base basis, until the sixth anniversary of the Date of Termination, provided that such tickets may only be used by you or your immediate family…”

If a change of control occurs prior to May 6, 2011 and the IRS determines that any payments to Sillerman were “parachute payments,” CKX will pay any tax gross-ups that are owed (so long as he’s in compliance with the agreement).

CKX will pay Sillerman $1 million for his consulting services, even if the agreement is terminated early. Until December 31, 2011, he’ll also get up to $25,000 a month to pay for office space, administrative assistance, and a car and driver.

Sillerman’s going to need that space. The agreement stipulates that he can have “reasonable access” to his current office through May 31 to remove his possessions, but after that, he “shall not access, or seek access to, the Company’s premises at 650 Madison Avenue, or the Company’s information systems, for any reason.”

Sillerman is to work as much as he deems “reasonably necessary” to promote the company’s best interests; however, his services “shall not exceed 20 percent of the average level of services you performed for or on behalf of the Company… over the 36-month period immediately preceding the date hereof.”

Now that’s a departure package that would surely get a lot of votes.

On June 25, 2010, the shareholders of XTO Energy, Inc. (XTO) will decide at a special shareholders’ meeting whether or not XTO should become a wholly owned subsidiary of ExxonMobil Corp. (XOM).

When Michelle wrote about the deal last December, she noted at the time that XTO’s senior executives had agreed to take consulting agreements rather than the larger sums they could have received under their employment agreements’ change in control (“CIC”) terms.  But it wasn’t until XTO filed its merger proxy last Friday afternoon that we learned just how lucrative those consulting deals will be.

In all, the five NEOs would have received an aggregate $114.35 million more if they had stuck with the CIC provisions in their employment agreements. But the money that they’ll get from the consulting jobs are a lot higher than one might have assumed after reading the 8-K that XTO filed last December. As a group, they’re still getting approximately $190,340,000 in cash and stock if the deal goes through.

The merger proxy also shows that some NEOs are sacrificing a lot more than others. For Bob Simpson, the company’s founder and Chairman of the Board of Directors, the difference is relatively small – $1.65 million. Simpson will receive $84.42 million under the consulting agreement instead of the $86.07 million he would have received per his employment agreement. But for the other NEOs, the difference between what they’ll get from the consulting agreements – compared to what they would have received from the employment agreements – is a lot more dramatic:

According to the chart on p. 108 of the merger proxy, the lion’s share of those payments will come from stock grants and retention payments, although the salaries and bonuses also pay very well. The consulting agreements will end on the first anniversary after the merger is completed; however, the parties can renew them for another year by agreement.

The proxy also discloses that director Jack Randall’s employer, Jefferies & Company, Inc., which provided merger-related financial advice to XTO, will get a transaction fee of $24 million if the merger goes through, plus out-of-pocket expenses, legal fees, and indemnification from “certain liabilities.”  According to the filing, Randall participated in the directors’ merger deliberations, but he abstained from voting on the merger “…to avoid any perception of a potential conflict of interest arising out of his employment with Jefferies.”

We’ll see what the shareholders think when they vote next month.  But the company’s top executives certainly have millions of reasons to hope that the merger goes through.

Image source: blmurch via Flickr.

Even though we don’t buy the pricey jeans produced by True Religion Apparel, Inc. (TRLG), we know they’re popular. And after reading the 8-K that the company filed May 17, we gained a little insight into why the company’s least expensive pair of jeans retails for nearly $200.00.

Monday’s filing announced that Michael Buckley had “ceased to be President” of the company on May 12. The accompanying press release explained that Buckley was leaving the company “to pursue other interests.”

Considering that Buckley had served as the company’s president for four years, his departure seems surprisingly sudden.  A peek at past filings doesn’t reveal any hint that Buckley planned to leave the company.  However, two days before he resigned, Buckley started selling shares of the company’s stock; in all, he sold 150,000 shares over a three-day period that ended on the day that he resigned.  Yet according to the Form 4 that disclosed the transactions, Buckley still owns 193,429 shares of True Religion stock – a sizable stake in the company, to be sure.

The filing doesn’t mention whether Buckley is getting any severance compensation from the company, but we’ll watch for future disclosures on that subject.

At the same time that the company announced Buckley’s departure, it announced the appointment of new company president Michael Egeck, who will start on June 4, 2010.  Egeck has about a decade’s worth of experience in the apparel industry, and he comes to True Religion following a stint as interim President at Affliction Holdings, LLC.

Egeck got a three-year employment agreement with the company that will automatically renew annually. The agreement states that he’ll start with a base salary of $650,000 that is “subject to increase (but not decrease)”, a 2010 cash bonus of $369,973 if the company meets its target performance goals (and more, if it exceeds its goals). He also received 100,000 restricted shares of common stock as an inducement to join the company that will vest in equal amounts over three years. If the stock price remains near its current trading price of $28.01 when the shares finally vest, that benefit could be worth a few million dollars to Egeck.

Executive transitions are usually costly, and this one is no exception. At least in this case, both the incoming and the departing presidents have plenty of money to buy fancy jeans, if they’re so inclined.

Although the crystal ball is a bit murky on what Vonage Holdings Corp.’s (VG) first quarter earnings report will look like when it’s released May 5, 2010, we got a clear glimpse into the company’s executive compensation practices, thanks to the proxy that Vonage filed yesterday.

That filing might lead one to conclude that the company’s revenues are soaring. And in the press release that accompanied the 8-K that Vonage filed on February 25, 2010, the company reported some improvements which prompted CEO Marc Lefar to say:

“In many ways, 2009 was a remarkable year for Vonage. During the past year, we upgraded our value proposition, enhanced the customer experience, reduced costs and better positioned the Company for future growth — this has been a breakthrough financial year. Although we faced considerable challenges due to the economy, competition and wireless substitution, we are stronger and more vibrant than ever.”

But a glimpse into the past leaves us less than convinced about Lefar’s rosy views.

Since 2002 (when it got its first residential subscriber), Vonage has used the voice over Internet protocol (VoIP) to provide customers with local and long distance telephone service. Based in Holmdel, New Jersey, Vonage reports that it employs about 1,225 people and serves about 2.4 million customers. That’s about 172,000 fewer subscriber lines than Vonage had at the end of 2008.

Vonage has traded for between $0.31 and $2.63 per share in the past year; it’s currently selling for $1.65 per share. That’s more than 86% lower than it traded for on May 31, 2006, when it sold for nearly $13.00 per share.

Now let’s take a closer look at that proxy.

Last year Lefar (who joined Vonage in July, 2008) got a base salary of $883,000 (he gets $925,000 in 2010), a bonus of $689,000, option awards of nearly $2.3 million, and almost $817,000 of “Other” compensation. Most of that – $ 648,127 – was for “private travel,” but $146,925 (more than $12,000 per month) paid for Lefar’s temporary housing expenses. Vonage also grossed-up the amounts to cover any taxes that Lefar owed on the benefits. As the proxy (and Michelle’s prior Vonage posts) explain:

“Mr. Lefar is entitled to payment for or reimbursement of his commercial air and car transport between Atlanta, Georgia, the location of our business office for certain product management and development employees and where Mr. Lefar maintains his primary residence, and our principal offices. Each year during the term of the employment agreement, Mr. Lefar is also entitled to (i) payment of or reimbursement for amounts up to a maximum of $600,000 plus the cost of commercial air travel (i.e., the cost of a first-class, fully refundable, direct flight booked one week prior to travel), to be used by Mr. Lefar for private air travel, (ii) payment of or reimbursement for the cost of housing (i.e., furnished housing, including utilities) near our principal offices and (iii) gross-up for tax purposes of any income arising from such expense payments or reimbursements that are treated as nondeductible taxable income.”

In July, Lefar will have completed two years of the three-year contract, an agreement that provides that his options will vest immediately if Vonage is sold and there’s a change in control. Had that occurred on December 31, 2009, Lefar would have received $2.5 million.

The company also announced a couple of weeks ago that it’s losing Gov. Tom Ridge as a board member. Ridge, who has served on Vonage’s board since 2005, declined to stand for re-election because of “other business commitments, including the travel and time demands associated with operating his global strategic consulting company.”

Let’s hope that when the results are announced next week, the shareholders have as much to celebrate as Lefar and the other top executives do.

Image source: M. Gifford via Flickr

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Sometimes a company’s best move may be to hire a consultant, but that help certainly doesn’t come cheaply.

For example, Alcoa, Inc. (AA) just signed an agreement to pay industry veteran Bernt Reitan $125,000 for “Consultant’s expertise and knowledge of aluminum manufacturing and fabrication, smelting, bauxite mining, bauxite refining and/or the sale or distribution of alumina and alumina related products, alumina refining and smelting technology and smelter and refinery construction.”  Until recently, Reitan was the Executive VP and Group President, Global Primary Products at Alcoa; he currently holds the title “Chairman’s Counsel.” He will retire on August 1, 2010, when the consulting agreement takes effect.  Per its terms, Alcoa can’t ask Reitan to work more than 25 days per calendar year, which means he gets a minimum of $5,000 per diem, or $625 per hour if he works an 8-hour day (plus expenses).

But another company is paying its consultant even more. Late last week, Snap-On, Inc. (SNA) filed this Transition Services Agreement as an attachment to its quarterly report.

The agreement involves Martin Ellen, who until recently worked as Snap-On’s Senior Vice President – Finance/CFO. While in that job, in 2009 Ellen received a base salary of $472,500 and total compensation of nearly $2 million. On April 1, 2010, Ellen became the Executive Vice President/CFO at Dr. Pepper Snapple Group, Inc. (DPS), where he will earn quite a bit more. In that job (according to an 8-K the company filed in mid-February), Ellen starts with a base salary of $525,000, a target bonus that ranges between 90-180% of that salary, and an initial equity grant of more than $1.3 million. He’ll also get nonqualified stock options and RSUs with a total cash value of $3.75 million to replace equity awards that Ellen lost when he left Snap-On.

Snap-On wants Ellen’s help as it prepares for arbitration with CIT Group, Inc.  There’s a good summary of the dispute on pp. 27-28 of the Q, but – in a nutshell – the disagreement involves various alleged underpayments made in the context of a financial services joint venture.  Snap-On alleges damages of $115 about million, and CIT Group’s response alleges damages in excess of $110 million.

The agreement requires Ellen to attend meetings and assist the company as it produces documents and generally prepares its case. He is also to assist Snap-On “…with the continued transition of the business of Snap-on Credit LLC as a result of the termination of the Company’s former joint venture arrangements with CIT Group Inc.” and to provide “assistance to the Company in connection with other matters as may be reasonably requested.”

In exchange for his help, Snap-On is paying Ellen:

“…a monthly retainer of $20,000 per month, payable on the last business day of each calendar month during the Term. This retainer shall cover up to 60 hours of Services per calendar quarter, and shall be paid whether or not any Services are requested by the Company. Any hours over 60 in a calendar quarter shall be paid at a rate of $1,000 per hour, and will be paid along with the following month’s retainer payment.”

Thus, the agreement assures Ellen at least $1,000 per hour, assuming he works all 60 hours per calendar quarter. If Snap-On only needs him for half that time (10 hours a month), his hourly rate doubles. And if it doesn’t call him at all one month, Ellen still gets $20,000.

To be sure, an executive like Ellen presumably has a lot of knowledge that will benefit Snap-On as it prepares for arbitration. What is less clear is how a busy executive in a new job will find the time to help his old employer get ready for its arbitration hearing. But regardless, it’s worth another $240,000 to Ellen… maybe even more.

Image source: purpleslog via Flickr

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While reviewing the proxy that First American Corporation (FAF) filed last week, we noticed an expensive executive transition that occurred recently with little fanfare.

The executive, Frank McMahon, was the CEO of First American’s Information Solutions Group. McMahon joined the company in February, 2006 after leaving his role as a managing director at Lehman Brothers Holdings, Inc. (He’d been an advisor to First American while there.)

At the time McMahon joined First American, the company assured him that his employment “will be guaranteed for a period of five years, commencing on March 31, 2006.” The Employment Offer Letter further promised that McMahon would receive “minimum annual cash compensation… equal to at least $1,750,000.”  He actually received more than $2.1 million in total compensation in 2006, more than $3.3 million in 2007, and more than $3.8 million in 2008.

McMahon only stayed in the CEO role of the Information Solutions Group for 19 months. On December 4, 2009, First American filed an 8-K to announce that McMahon had resigned four days earlier and that Anand Nallathambi would serve as president/COO of the Information Services Group (he has since been promoted to CEO). No reason was given for McMahon’s sudden departure.

Six weeks later, on January 15, 2010, First American filed another 8-K which announced the terms of McMahon’s Separation Agreement (the agreement itself was not filed until First American filed its annual report on March 1, 2010).

In addition to containing a release and an agreement not to disparage the other party, the company agreed to pay McMahon

“…$3,309,305 in severance pay and $2,040,500, representing a bonus for calendar year 2009. In addition, the Company and Mr. McMahon entered into a Consulting Agreement, which terminates on November 30, 2011, whereby Mr. McMahon agrees to provide consulting services at the request of the Company for total consideration of $1,058,388, payable as follows: $50,000 on May 30, 2010; $479,194 on November 30, 2010; and $44,099.50 each month starting December 30, 2010 and ending November 30, 2011.”

McMahon’s Consulting Agreement is noteworthy in part because the description of services that he is to provide seems vague. It states:

“the Company has retained Consultant to provide, and Consultant agrees to provide, to the Company and its subsidiaries consulting services as reasonably requested by the Company… including, without limitation, those services as may be requested to transition employee, client, vendor and other relationships to employees of the Company or its subsidiaries and to complete transactions in which the Company or any of its subsidiaries are involved. Consultant shall report to the chairman of the board, the chief executive officer of the Company and their designees.”

The Consulting Agreement also states that so long as McMahon doesn’t compete with the company or solicit its customers, “Consultant is free to pursue any and all outside activities and/or employment as Consultant desires, and Company acknowledges that Consultant will likely be involved in other business activities, contracting and/or employment.”

One wonders what McMahon is expected to do for this additional $1,058,388.  Certainly, the company tells us next to nothing, which leaves the matter to our imaginations.  But regardless, for him to depart First American with more than $6.4 million in extra compensation after working there for less than 4 years seems generous, to say the least.

Image source: Todd Ryburn via Flickr

Ah, springtime – that glorious season when the sun coaxes perennials into bloom, birds trill lightly in the trees, and Martha Stewart Omnimedia’s (MSO) proxy unfurls with yet another raise for Martha.

As longtime readers know, Martha Stewart’s company is one of our “frequent flyers” – and that’s not a good thing. Last year, the post about Martha’s new employment contract and its $3 million retention bonus was a contender for the Worst Footnote of 2009. Other juicy past disclosures include a post about Martha taking her “guaranteed minimum bonus” (even after several rounds of employee layoffs), and the 2008 disclosure that Martha gets another $2 million annually for allowing MSO to film tv shows at her various properties.

But now it’s 2010. While the stock has doubled over the past year, it’s still nearly 66 percent lower from its April, 2005 trading price. How did Martha do this year?

As it turns out, pretty well.  According to the 2010 proxy, which the company filed last Friday at 5:15 p.m., Martha became the company’s “Chief Editorial, Media and Content Officer” on March 1, 2010.  And her 2008 base salary of $900,000 soared to $1.7 million in 2009.

Martha got a $3,114,231 bonus, which consisted of the above-referenced $3 million “make-whole/retention payment” that the company agreed to pay when she signed her new employment agreement, as well as $114,231 more for the “first quarter guaranteed bonus.”  The board also gave her another bonus of $666,667 – this time labeled “non-equity incentive plan compensation” – which was higher and a little sweeter than what the other NEOs received. The filing explains:

“The bonus payments to the NEOs were paid 50% in cash and 50% in fully vested Company stock in lieu of cash, except in the case of Ms. Stewart, who received all cash.”

Talk about a vote of confidence by taking the cash over the stock! She also received more than $3.5 million in “Other Compensation” (which is actually down from last year). Nearly $2.6 million of that was for the fees and expenses the company pays Martha under its “Intangible Asset License Agreement” which includes the lease and upkeep of her homes. More than $311,000 paid for insurance premiums, another $178,352 bought security services, $105,452 was “for the portion of personnel costs for individuals performing work for Ms. Stewart for which we were not reimbursed,” and $100,000 was for Martha’s “non-accountable expense allowance.” Nearly $50,000 paid for a weekend driver, and the company also spent an unspecified amount of money for “expenses for personal fitness provided in her capacity as on-air talent and telecommunications services.”

Not to be overlooked, in an additional proxy-related document the company filed the same day, Martha Stewart and Executive Chairman/Principal Executive Officer Charles Koppelman wrote letters to their shareholders, just as they did last year. At the end of Koppelman’s 2010 letter, he said:

“We have taken significant actions to streamline our cost structure, which is geared to support improved profitability. In addition, we have maintained a healthy balance sheet that should give us financial and strategic flexibility to execute on our growth strategy. This is the foundation of our business.”

Forgive us for feeling slightly cynical, but we’ve come to believe that the “foundation” of Martha Stewart Omnimedia just might be to redirect as much of the company’s money as possible to Martha Stewart.

When it’s time to make executive compensation decisions, companies seek input from several sources. Those usually include the Compensation committee, the executives themselves, and outside consulting companies that specialize in researching what other executives at the ubiquitous “peer companies” earn.

But Comp committees often act as though shareholders – like children born in the 1950s – should be “seen, but not heard.” In fact, in most of the SEC filings we read, directors adamantly oppose shareholder “say on pay” resolutions.

That’s not the case, however, at Amgen, Inc., (AMGN) the recipient of today’s coveted footnoted gold star.

Amgen’s recent proxy includes an intriguing – and, so far as we can tell, unique – method that invites shareholders to express their thoughts about how the top executives are paid. At the bottom of page 50, here’s what you’ll find:

Obviously this is a cost-effective way of getting input from shareholders, assuming that they read the proxy and then complete the survey.

But we also found it interesting that Amgen – a huge company whose NEOs earned total compensation packages in 2009 that ranged from $4.9 million to $15.3 million – is the company that’s blazing this trail to encourage shareholders to express their opinions.

We called Amgen’s media relations department to ask why the company took this step and how the response has been to date.  We haven’t heard back yet; however, if we get an answer, we’ll add it to this post as an update.

But regardless of Amgen’s reasons for including this concept in its proxy, we think that finding new ways for shareholders to communicate with the companies they invest in is a smart practice.  Wouldn’t it be great if other companies followed suit?

Special thanks to Amy A. for bringing this gem to our attention.

Earlier today, Theo reported that Cablevision spent about $5.2 million to provide its top executives with goodies such as dividends, deferred comp, and some pretty sweet perks (e.g., cars and drivers, “executive home security,” and even free cable!).

So surely the nation’s largest cable provider, Comcast Corp., (CMCSA) isn’t going to be outspent by a smaller company, is it?

Comcast may want you to think so. In its recent proxy, the company states:

Before 2006, we provided a limited amount of additional compensation through certain personal benefits to ease the demands on senior executives (including travel) and to provide security to our named executive officers and their families. Beginning in 2006, such benefits have been eliminated or our named executive officers have been required to pay us for any benefits that would otherwise be considered perquisites…. the Compensation Committee decided that as a matter of policy we should not provide tax gross-ups to our named executive officers for perquisites.

What an economical policy, right?

Yet if you look at the “Other Compensation” column on the Summary Compensation Table, you’ll find that Comcast spent an aggregate $10.9 million on its NEOs – more than twice as much as Cablevision spent. Besides Senior VP/General Counsel/Secretary Arthur Block, who only got the basic $14,700 contribution to a retirement-investment plan account, the other four top executives got between $991,854 and more than $4.4 million each.

Most of that represents the company’s contributions to the executives’ deferred compensation plans ($2,431,012 for Brian Roberts; $2,458,600 for Michael Angelakis; $3,944,800 for Stephen Burke; and $868,219 for David Cohen). But another large chunk represents personal use of either the company’s plane or a chartered plane. The two top users were Roberts, with $492,000 worth of personal time on the plane, and Burke, with $455,154.  The company notes, “For security reasons, Company policy requires Messrs. Roberts and Burke to use Company provided aircraft for business and personal travel, although the named executive officers are required to pay us for personal use of Company provided aircraft in amounts determined by Company policy.”

That might leave the impression that the executives have to pay for their personal use of the plane, but the next paragraph explains that these numbers are in addition to whatever amount the executive paid:

“The amounts reflected for each named executive officer in respect of personal use of Company provided aircraft indicate the extent to which the incremental cost of such use exceeds the amount paid to us by the named executive officer as stated above.”  (emphasis added)

And yet – as high as these numbers are – they’re only a fraction of the total compensation that these executives received. Roberts, Angelakis, and Burke each received a 2009 comp package ranging from $21.5 million to nearly $34 million.

That being the case, perhaps the shareholders might propose that the company officially change its name to “Compcast”?

Image source: Tyler Yip via Flickr

For a store that makes money on the principle of thrift, Dollar General (DG) can be surprisingly generous with its departing executives.

We first saw this in 2005, when Michelle wrote this post about the company’s lucrative send-off for “Chairman Emeritus” Cal Turner, Jr.  At the time, Dollar General announced Turner’s retirement without mentioning that he left with (among other things) $1 million, five years’ worth of Tennessee Titans tickets, and a late-model Audi.

Fast forward to last Friday, when Dollar General’s proxy disclosed an even better severance package for David Bere, the former president and Chief Strategy Officer. (Bere actually stayed through January 29, 2010, the end of Dollar General’s fiscal year.)

In the company’s January 12 press release, which noted that Chairman/CEO Rick Dreiling would assume Bere’s duties, Dreiling said:  “Dave helped lead the Company through times of tremendous change and growth. He has been an invaluable friend and partner to me since I joined the Company. We all wish Dave and his family the best in his retirement.”

While Dollar General did file an 8-K and Separation Agreement at the time, the total amount Bere would receive wasn’t known since the company had not yet determined how much the 2009 senior executive “Teamshare bonuses” would be.  But the proxy answers that question, disclosing that Bere’s severance-related compensation (explained in great detail in footnote 8 on p. 40) was $4,013,610. Added to his base salary, that means that Bere’s 2009 total compensation was $ 4,770,193.  (And oddly, the Separation Agreement also provides for up to a year of outplacement assistance, which one doesn’t often find in the context of a retirement.)

And yet Bere stands to get even more than the $4 million farewell package. Page 56 of the proxy reveals that in February, 2011, he will get approximately $713,929 from SERP Benefits that vested prior to his departure and from his Deferred Comp Plan Balance.  However, the filing notes: “Final payment amounts may vary due to potential gains or losses until payment is made.”

Whatever that final amount turns out to be, we’re guessing that Bere’s shopping habits will skew a bit higher than $1 tchotchkes from the Dollar General stores.

Image source: Rob Gale via Flickr

Anyone who hangs out around kids will eventually hear some whiny version of, “I should get  (fill in the blank) because everyone else has it.”

But being in proxy season, we find that there’s plenty of executives who try to use that logic, too. Proxy after proxy tells us that – “in order to attract the best talent” – companies must allow their executives to whisk around the globe on the company jet (even for personal travel), hold court in a luxury NFL suite, and rake in thousands of “gross-up” dollars to pay their own taxes. The company – and therefore the shareholders – foot the bill for that largesse. However, there are some companies that dare to be different, and today’s Gold Star highlights one of them.

To be sure, it was the sheer brevity of the 16-page proxy that Heartland Express, Inc. (HTLD) filed that initially caught our attention. After all, some companies take 16 pages (no exaggeration) to explain their various bonus plans!

Then again, simplicity rules here. Chairman/CEO Russell Gerdin’s base salary in 2009 was $300,000.  Once you add in all his stock awards, options, 2009 bonus, non-equity incentive plan, perks, gross-ups, and “All Other Compensation” his salary swelled to… $300,000.

How is that possible? The proxy explains this compensatory enigma as follows:

The Compensation Committee believes that Mr. Russell Gerdin’s salary is reasonable compared to similarly situated executives, and that as a direct and indirect holder of approximately 42% of the Company’s outstanding stock, Mr. Russell Gerdin receives an incentive through appreciation in the market value of the Company’s stock….

Okay, one might argue, but Gerdin owns a large stake of the company. What about the other NEOs?

Like Gerdin, in the past few years they’ve received good salaries, but no additional stock, options, bonuses, perks, or other kinds of compensation. The proxy explains:

We believe that stock ownership by our Named Executive Officers helps to align the interests of such officers with the interests of stockholders in maximizing long-term stockholder value…The Compensation Committee believes that the equity ownership of our senior management currently is sufficient to align their long-term interests with those of our stockholders, and therefore did not recommend any stock-based awards to the Named Executive Officers in 2009.

What a novel idea! Pay talented leaders well, give them enough stock so they’ve got a stake in the company’s future success, and then stop!

Colorado-based Crocs, Inc. (CROX) is marketing its new footware line with the slogan “Feel the Love.” But that motto probably also describes how retiring President and CEO, John Duerden, feels after negotiating the terms of his departure from the company.

Longtime readers may recall that Crocs has been a footnoted frequent flyer for several years now (a few recent examples are here, here, and here). However, most of those stories pre-date Duerden’s arrival; he joined the company just over a year ago — at the end of February 2009.

Duerden came to Crocs after leaving the Chrysallis Group, a consulting firm he founded in 2006 that specialized in developing and renewing brands. He was 68 years old at the time and had been an executive at companies such as Reebok.

The terms of Duerden’s employment agreement gave him an $850,000 base salary, a $350,000 signing bonus, 400,000 restricted shares of stock and an equal number of options, and other benefits. Interestingly, the agreement did not give Duerden any guarantee that the position would be his for a particular number of years; in fact, it stated that it “shall not be for any specific term and shall be subject to termination at will by either Executive or the Company for any reason upon written notice to the other party.”

That day arrived just over a year later. On March 1, 2010, Duerden relinquished both his position as an executive and as a member of the board of directors. Although the company announced Duerden’s retirement then (and named John McCarvel as his successor), the parties had not yet negotiated the terms of Duerden’s departure. It was just yesterday that Crocs filed this Separation Agreement, dated March 31, 2010.

According to the document, Crocs will pay Duerden $1.7 million in cash in September  and it will accelerate the vesting for Duerden’s 100,000 shares of restricted stock shares and another 100,000 option shares. Even with the stock currently trading at $8.90, the early vesting of those equities is worth a lot to Duerden. Crocs will also pay him $336,000 for his 2009 annual incentive compensation, and it will continue to pay the employer portion of health care premiums for Duerden and his family through February, 2011 (unless Duerden ceases to be eligible for COBRA health insurance continuation). In exchange, Duerden signed a release and agreed not to compete against Crocs, solicit its customers and vendors, and protect its propriety information.

With that kind of severance package, wouldn’t any of us “Feel the Love”?

Cliffhangers are always fun, although personally we like them better in the context of thrilling new novels than in SEC filings.  Yet that’s what we discovered when we dug into the proxy that Mariner Energy, Inc. (ME) filed late last week.

But first, here’s the set-up….

We have to go back to October 27, 2009, when the company filed an 8-K to announce that John H. Karnes, Senior Vice President, Chief Financial Officer and Treasurer, had left the company the prior week. The press release that accompanied the filing explained that Karnes “is leaving the company to pursue other interests.” Scott Josey, Mariner’s Chairman/President/CEO, said at the time, “We thank John for his contributions to Mariner over the past three years and wish him well in his future endeavors.” (The company tapped Jesus Melendrez, its Senior Vice President and Chief Commercial Officer, to assume the additional roles of Acting Chief Financial Officer and Treasurer.)

The 8-K also disclosed that Karnes “…will receive severance as provided in his Employment Agreement with Mariner, dated as of October 16, 2006, and restricted stock grants under Mariner’s Stock Incentive Plan, as amended and restated from time to time.”

Thus, since last October you’ve probably been wondering anxiously, “How much did our protagonist get when he left Mariner Energy?”  You may have even researched his October, 2006 Employment Agreement in a frantic search for clues that would enable you to do the math yourself, although there are so many variables that calculating the final number isn’t possible.  (That’s because there’s no way to know whether Karnes would get raises after 2006, whether he’d get bonuses or RSUs, and so forth.)

Well, patient readers, wait no longer. The answer to our cliffhanger was finally revealed in last week’s proxy: After three years at Mariner, Karnes left the company with an extra $3,198,152 in severance-related compensation. That’s a surprisingly high number, given the fact that in 2006 Karnes started with a base salary of $235,000.  By 2009, his base salary was $241,288 (although it had been higher in 2007 and 2008).

But we know from the Summary Compensation Table’s footnotes that the approximately $3.2 million that Karnes left with consisted of $1,614,600 in Severance Pay, $1,553,091 from Accelerated Stock Vesting, and another $30,461 for “Health Benefits Continuation” (that was the company’s share; Karnes had to contribute, as well).

That works out to nearly $1.07 million in extra compensation for each year that Karnes worked for Mariner Energy. For him – financially, at least – that seems like a pretty good ending.

Image source: Jaap Steinvoorte via Flickr

We can’t speak for anyone else, but we’ll admit that we were caught off guard by the regulations that SEC Chairman Mary Schapiro unveiled at a  press conference earlier today.

In an unusually buoyant tone, Schapiro said that the new regulations would accomplish two key goals:

• Facilitate the work of the SEC’s Enforcement Division, which was restructured in mid-January
• help to reduce the nation’s nearly $12.7 trillion national debt.

“It’s time for meaningful reform in the marketplace,” Schapiro said at the press conference. “We’ve got to take bold steps to prevent the next Enron, or the next Bernie Madoff, from swindling hard-working investors. And if they’re going to try something, at least they’re going to pay for it.”

While the final regulations have not yet been finalized, here’s a few of the key headlines from this morning’s press conference:

• Page limit on filings:   In addition to the standard filing fee, companies whose filings exceed a 50-page limit must pay an additional $25,000 for every 50 pages thereafter; (Editorial note: This means that Bank of America (BAC) may want to re-think the 756-page annual report that it filed in February, or else be willing to “Ding the Debt” by $360,000);

• New regs on type size:   Any company that submits filings with footnotes printed in type smaller than a 9-point font must pay a $50,000 fine and provide 10,000 pairs of eyeglasses to its local Lions Club.

• Filing Deadlines:

*  Filings submitted to the SEC on Fridays after 4 pm EST must pay a $20,000 “Hide the Baloney Tax”;

*  Filings submitted to the SEC on the day prior to a federal holiday or day that the major markets are closed must pay a $40,000 “Tricky Filers’ Tax” (Since tomorrow is Good Friday, we’re expecting a lot of those today, though keep in mind that the SEC is open tomorrow)

*  Filings submitted to the SEC past their scheduled due date (available here) must pay the regular filing fee plus a 100% late fee;

• Responses to Comment Letters: In addition to a new $1,500 fee, companies sending responses to Comment Letters must include a hand-written apology, signed by the CEO, to the SEC Branch Chief that expresses remorse for requiring a disproportionate amount of the SEC staff’s time.

“We think these new regulations are a real ‘win-win-win’,” said Tom Sporkin, Chief of the SEC’s newly created Office of Market Intelligence. “Besides making the market more transparent for investors and reducing our national debt, we hope that these changes enable our allies at footnoted.org to stop reading filings at a reasonable hour and reclaim their nights and holiday weekends.”

P.S. from all of us here at footnoted:  Happy April Fool’s Day!

According to one version of history, Queen Marie Antoinette, after being told that the hungry masses had no bread, replied, “Then let them eat brioche.” Supposedly, according to that legend, Marie wasn’t being cruel – just clueless.

We don’t know whether the story is really true, just like we’ll never really understand the expenditures that Sprint Nextel Corporation’s (S) Compensation Committee continues to make.

In the proxy that Sprint filed yesterday, the company reported that it spent $454,281 for CFO Robert Brust to make personal trips on the corporate jet and chartered jets. (That’s actually down from the $601,338 Sprint spent on Brust’s personal trips in 2008, which Michelle wrote about last year in this article for DealBook. But it still ranks as one of the highest amounts we’ve seen for a company to spend on an executive’s personal travel.)

Spending that kind of money, of course, is quite a contrast to the public display Brust made when he snatched up hundreds of hotel pens and joked that it was his strategy to cut office supply costs. At the time, Bloomberg reported that Brust used the pens to illustrate a serious point, saying “The message is, we really have to be serious about this, because we are in an economic event that nobody understands.”

Brust came to Sprint in May 2008 after he had retired as CFO from the Eastman Kodak (EK). When he signed on, Sprint gave him an employment agreement that paid Brust a million dollar salary, a $1.65 million cash sign-on bonus, hundreds of thousands of sign-on RSUs and options, participation in the company’s short- and long-term incentive plans, and “up to 35 round-trip personal domestic flights on either, at the Company’s discretion, Company aircraft or charter aircraft.” According to p. 39 of Sprint’s 2009 proxy, allowing Brust personal use of the corporate jet “…was necessary in order to attract Mr. Brust, who had a very specific skill set that we desired, to work for us following his retirement from Eastman Kodak Company, where he gained valuable experience working with a challenged company.”

On December 23, 2009, Sprint filed amendments (see here and here) to Brust’s employment agreement, which would otherwise have expired on May 1, 2010. These provided for – among other things – a “Special Bonus” of $600,000 if Brust stayed with Sprint for another year (to be paid at $50,000 per month starting May 1, 2010 and ending April 1, 2011). The additional year, the filing explained, would give Sprint time to find a new CFO and Brust time to shift responsibilities to the new person. It also gave him “a long term incentive award target opportunity of $3 million” which will be half options and half RSUs, subject to some conditions. Those awards will vest on May 1, 2012.

Strangely, although these Amendments don’t address the issue of usage of the corporate jet, p. 37 of this year’s proxy states:

In consideration of these additional benefits, Mr. Brust agreed to an extension of his noncompetition restricted period to 24 months, a mutual 60 days’ notice of termination provision, no further use of corporate aircraft use for non-business travel after May 1, 2010, and the limitation of his post-termination severance period to six months on the condition that his sign-on equity would still vest on May 1, 2011.

And just as strange is the fact that the company took away a perk that cost the company as much as $600,000 but turned around and gave him cash for about the same amount.

Whether Sprint’s bet on the 4G network and Brust’s talents as CFO will lift the value of the company’s stock still remains to be seen. But it’s surely no consolation to the thousands of Sprint employees who’ve lost their jobs in recent years.

It’s doubtful that Sprint’s directors are either clueless or callous enough to utter the updated Kansas City version of Marie’s declaration, which might be something like, “Let them eat barbecue.” But even if they did, that’s hard for all those unemployed workers to do without a paycheck.

Image source: Élisabeth Vigée-Lebrun