MF Global's CEO: Too Expensive to Axe?

Canning Davis would cost MF Global (MF) $40 million.

The serial debacles afflicting futures brokerage MF Global Ltd should by now have chief executive officer Kevin R. Davis squirming uncomfortably in his doubtless well-padded chair. But termination and change in control payments, detailed in the first proxy statement since the company’s IPO last July, put the cost of his defenestration at almost $40 million.

Thanks to the package negotiated when MF Global Ltd was spun out of London-based Man Group last year, termination by the company without cause or by Davis himself for good cause would, at Mar. 31, 2008, have rendered him eligible for:

• Accrued and unpaid compensation based on his average annual cash bonus for the three prior years, including bonuses received from Man Group before the IPO, totaling $7.1 million.
• A lump sum equal to three times his base salary and average annual cash bonus over the last three years, including bonuses received from Man Group before the IPO, totaling $24.3 million.
• Three years “continued welfare benefits,” also covering his spouse and dependents, at the bargain basement price of $91,260. And
• Accelerated vesting of 808,333 restricted shares, worth $8 million (based on the Mar. 31 closing price of $9.91). Davis also has nearly 1 million options expiring Jul. 18 2014 but the $30 strike on those is so far overhead it’s leaving a contrail.

The good news is that, thanks to Davis’s stewardship, up to and including the bunglement of last week’s profit warning ahead of a $300 million refinancing, the cost of that final item is down to $4.94 million, based on Tuesday’s $6.11 close. At the current rate of progress—down five of the last six trading days, and 80 percent since the IPO’s first tick in Jul. 2007—that particular line item may well be worth less than the “continued welfare benefits” by (ahem) fall’s first blast.

MF Global Ltd DEF 14A
Definitive Proxy Statement
See: Potential payments on termination and change in control
US Securities & Exchange filing (Pp 45-48)

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Disclosure: NakedShorts’ Falling Anvil Portfolio remains long MF.