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Posts by Themes
2009 InvesGuard Scores,
ACS,
Audit Firms,
bank compensation,
Bank of America TARP repayment,
bank pay,
Citigroup Board shakeup a success ,
corporate performance,
Cruikshanks at the house financial services committee,
Dick Fuld at the House Financial Services Committee,
earnings,
Earnings,
Gen-Probe Q4 earnings,
Goldman Hearing,
Goldman Sachs Senate Hearing,
Governance Scorecard,
JP Morgan Chase earnings,
kraft cadbury,
Lehman at the House Financial Services Committee,
M A,
mergers,
Pay regulation,
rating,
Rats leaving a sinking ship,
scorecard,
slap in the face for corporate governance,
TARP Companies,
TARP repayment,
the real story behind Lehman's Directors,
Ursula Burns,
Xerox
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TARP Companies Outwitting Pay Regulation?
Pay regulation has been a contentious issue for some time now. Causing a lot of heartburn, it has dissidents calling it a move towards strong socialistic ideals. Different pay regulations address different components of a pay structure.
In the U.S. there is more than one governing body that is focused on regulation of pay. This year alone, there have been multiple, restrictive rules governing pay at Troubled Asset Relief Program (TARP) recipient companies (see table below).
Obviously such regulation is bound to take its toll on morale. When non TARP borrowers hand out generous bonuses and salaries it is bound to make executives at TARP companies restless.
Besides pay regulation, these TARP recipients have had to contend with a flight of senior management executives. The past one month alone has seen at least 11 instances of senior management exits at TARP companies.
*First Bancorp’s Audit Committee investigated into certain personal transactions that Mr. Beauchamp failed to report to the Corporation in accordance with the Corporation’s policies and procedures.** Douglas Hart joined Webster in 2007.
Those who are familiar with InvesGuard’s scoring model will know that every company in our database is scored based on such exits.
Even ex TARP borrower companies such as Morgan Stanley have been faced with executive level changes. The company recently announced a change at the topmost level with Co-President James P. Gorman succeeding current CEO John Mack from January 1, 2010.
But there are some companies and employees who appear to fight back at such regulation.
Take the example of Mr. Ross Kari. He was employed with Fifth Third Bancorp (FITB) in November 2008. FITB which is a TARP recipient to the tune of around $3.4 billion, appointed Mr. Ross Kari with a sign on bonus of $100,000 and a salary of $580,000. Unfortunately, for reasons best known to Mr. Rossi, this offer lost its luster and within a year, he accepted the CFO position at Freddie Mac (FRE) on September 22, 2009.
Of course, such a position even with a company as deep in government debt as Freddie has come with a significantly higher compensation package than what Mr. Rossi had been making at Fifth Third Bancorp.
The package includes:A base salary of no less than $675,000
A target annual total direct compensation opportunity of $3,500,000, which will consist of the base salary of $675,000, an additional annual salary of $1,658,333 paid over time in installments and an annual target incentive opportunity of $1,166,667. The actual dollar amount of the incentive opportunity Kari will receive will be determined in the discretion of Freddie Mac, subject to approval by FHFA
A cash sign-on award of $1,950,000 in recognition of the forfeited annual incentive opportunity and unvested equity at his current employer. This award will be paid in installments during Kari’s first year of employment with Freddie Mac. If Kari is not an employee of Freddie Mac on an installment payment date, the installment will be forfeited. A portion of each installment will be subject to repayment in the event that, prior to the first anniversary of an installment payment date, Kari terminates his employment with Freddie Mac for any reason or Freddie Mac terminates his employment for cause (as is defined in the Memorandum Agreement)
Pretty generous? Sure, but will someone tell me how this fits in with the myriad government pay regulations? Does it fit in at all?
Take another instance of SVB Financial Group (TARP borrowings of $235,000,000) which increased base salaries of its executives.Mr. Ken Wilcox, President and Chief Executive Officer of the Company, from $710,000 to $1,000,000;
Mr. Greg Becker, President of Silicon Valley Bank, from $425,000 to $700,000;
Mr. Michael Descheneaux, Chief Financial Officer of the Company, from $425,000 to $485,000; and
Mr. Dave Webb, Chief Operations Officer of the Company, from $375,000 to $405,000.
Increasing base salaries to circumvent pay regulation? Not very innovative….
If you have come across any more of such ‘sidesteps’, we would love to hear from you.New Scorecard Added – Devon Energy Corp (DVN)
New Scorecard Added – Devon Energy Corp (DVN)
Company Name: Devon Energy Corp (DVN)
Industry: Oil & Gas Producers
InvesGuard has just released a Corporate Governance scorecard for Devon Energy Corp. (DVN). Devon Energy scores well in its Internal Audit Control Environment & Practices and adequate in terms of the independence of its Board of Directors and accountability of Senior Management, but shows poorly across our Environmental & Social Commitment criteria.
( Click here to view the detailed Devon Energy Corp’s scorecard)
Given that it is a Oil & Gas Producer, Devon Energy Corp’s poor showing on the Environmental and Social Commitment front could be of concern in the long term. From a reporting perspective, Devon Energy Corp publishes certain mandated information on Emissions and Safety Records, but is not specific about the goals it sets for itself on the Environmental Front, nor is does it make a public commitment by participation in such collaborative initiatives like the UN Global Compact. More information about Devon Energy Corp’s showing on the Social and Environmental segment of our scorecard can be found on Devon Energy Corp’s Company Page , under the “Social and Environmental” Tab.
On other fronts, Diversity and Independence remain issues of concern with the Board of Directors of Devon Energy Corp.
The company does however perform well across our Internal Audit Environment criteria and demonstrates a well developed Audit mechanism with independent committee members.
Devon Energy Corp’s Overview and Scorecard
Other companies covered by InvesGuard in the Oil & Gas Producers industry include:
- Vaalco Energy
- Chesapeake Energy
- Conoco Phillips
Disclosure: No positions.---------------------Xerox’s Ursula Burns goes shopping! Spends almost $4 billion on ACS.
On September 28th, Xerox announced its impending purchase of ACS. Xerox CEO Ursula Burns hopes to get into the big leagues as far as Business Process Outsourcing (BPO) is concerned. The big focus ofcourse here is the synergiesthat Xerox keeps talking about:
Click to enlarge. Source: Xerox Corporation.
Expected to catapult Xerox’s revenues to $16 billion, the deal could potentially mean the end of the road for more than a few ACS employees. Reviewing the analyst call transcript(pg 9) it appears that for ACS CEO, Lynn Blodget, the biggest synergy could be in terms of cost efficiency that arises out of using Xerox’s automation processes and image based solutions. These solutions can eliminate the need for “human beings” (Lynn’s words) which can translate into huge labor cost savings for ACS . ACS being a BPO, labor costs constitute the biggest chunk of their costs. Speaking of labor costs, according to ACS CEO Lynn Blodgett’s employment agreement, in case of his removal from the positon of Chief Executive Officer, he gets a severance lumpsum amount equal to three times the sum of (i) his annual base salary, plus
(ii) an amount equal to his discretionary bonus for the immediately preceding fiscal year. Further, any unvested stock options or other equity-based awards granted to Mr. Lynn Blodgett under the 1997 Stock Plan, the 2007 Equity Plan or any omnibus stock incentive or award plans adopted by the Company that are outstanding as of the date of such termination will become fully vested and non-forfeitable.
Mr. Blodgett is also entitled to receive the excise tax gross-up benefit. According to the ACS proxy, the change of control payments to Mr Lynn Blodget assuming a change of control on June 2008 would be $9.03 million.
Alongwith all the other labor related cleanups that the combined entity will have to do, hopefully Xerox can also be persuaded to address it’s Board deficiencies (courtesy: invesguard.com) as well.
Disclosure:No Positions.