Why Did Cendant Execs Receive 200% Bonuses? "We're Happy to Discuss It Offline" (CD)

| About: Cendant Corp. (CD)
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Kirk Caras from Relational Investors grilled Cendant CEO Henry Silverman about executive compensation in view of the company's disappointing performance last year. Mr. Silverman's conclusion: let's take it offline. Part of the company's Diversity and Inclusion Strategy?

Kirk Caras, Relational Investors:

Yes, this is Kirk Caras. Question, last year at the investor day back in December when you guys provided guidance, you guys provided guidance of about $3.1 billion for ’05 and for ’06 guidance of about $3.7 billion and yet, obviously you’ve fallen quite short of that for ’05, about 8% if you exclude the charges. And also now providing guidance for ’06 is coming in just about south of $3 billion, which is about 20% short of the original guidance.

So, with yesterday’s disclosure that the executive management team is receiving performance bonuses close to what looks like their original targets of 200% of based salary, I was wondering if you could provide a little bit more color on what exactly the performance criteria the comp committee uses in awarding those bonuses. And also, provide a little bit more color on what the decision process is going forward on Henry’s performance bonus compensation and why that decision hasn’t been made yet. Thank you.

Henry Silverman, Chairman and CEO:

I’ll answer the question about me. It hasn’t been made yet because we haven’t finished all the metrics that are around my contract, my contractual benefits that are, as you know, were approved by both the court and shareholders last year. I would expect that to be done in the next few days and the comp committee to act on that.

With respect to my colleagues, remember the bonuses were for 2005 and not 2006 and really don’t take into account performance in 2006 as the year obviously doesn’t count for a 2005 bonus. It looks at a variety of responsibilities. In the case, for example, of two of my colleagues, Mr. Holmes and Mr. Smith, their business has actually exceeded their budgets for the year, back in December of ’04.

So, you know, I think this is something we’re happy to discuss with you offline, but we feel very comfortable that our comp committee acted appropriately.

We applaud Kirk for directly approaching the touchy subject of compensation, and wonder why these pointed questions do not feature more frequently in analyst calls. More details are available on the Cendant conference call transcript.

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