Linn Energy: Better To Be an Employee Than a Shareholder?

May. 1.08 | About: Linn Energy, (LINEQ)

I received a 2008 proxy from Linn Energy (LINE) yesterday.

Proposal Three caught my eye:

...which a) increases the total number of Units authorized to be issued under the LTIP from 3,900,000 units to 12,200,000 units, which represents an incremental increase of 8,300,000 units, b) removes the limitation on the number of restricted units that may be awarded under the LTIP within the overall limit on units that are authorized to be issued under the LTIP. . .

The previous allotment was 3.9 million units, of which only 1.5 million could be awarded as restricted units. Under Proposal Three, any remainder of this 3.9 million as well as an additional 8.3 million units can all be awarded as restricted units -- as opposed to options that the employees have to pay for.

In case you have doubts, the proxy statement clarifies:

We intend the restricted units under the plan to serve as a means of incentive compensation for performance and not primarily as an opportunity to participate in the equity appreciation of our units. Therefore, plan participants will not pay any consideration for the units they receive, and we will receive no remuneration for the units.

According to the statement, there are currently 200 employees in the plan, plus five directors. Assuming the 8.3 million units are given as unrestricted grants, as the proposal allows, this amounts to a handout of roughly $885,000 per employee, above and beyond the original allotment. Of course, that assumes it’s evenly distributed, from the executive suite to the mailroom.

I am no longer a LINE unitholder. However, I am thinking about applying for a mailroom position there.

Disclosure: none