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CSWC- Management Incentive For Increase In Stock Price

|Includes: Capital Southwest (CSWC)

CSWC is a BDC trading at a significant discount to it $51.17 NAV. Late last week the company announced a new management compensation plan that is highly dependent on stock price performance- effectively the senior management gets 6% of of the increase in share value. From the 8-K

"On August 28, 2014 (the " Grant Date "), Capital Southwest Corporation (the " Company ") adopted an executive compensation plan consisting of nonqualified stock option, restricted stock and cash incentive awards intended to align the compensation of the Company's executive officers with the Company's key strategic objective of increasing the market value of the Company's shares through a transformative transaction ( e.g ., a spinoff to the Company's shareholders of one or more wholly-owned subsidiaries of the Company, a going private transaction or leveraged recapitalization of the Company, or a termination of the Company's regulated investment company status) for the benefit of the Company's shareholders.

Under the plan, Joseph B. Armes, Chief Executive Officer, Kelly Tacke, Chief Financial Officer, and Bowen S. Diehl, Chief Investment Officer, will receive a payout under the awards equal to six percent of the aggregate appreciation in the Company's share price from the Grant Date (using a base price of $36.16 per share) to the date of the transformative transaction (such transaction, the " Trigger Event ," the transaction date, the " Trigger Event Date " and such payment amount, the " Total Payout Amount "). The value accretion will include the value of any distributions to the Company shareholders, including any capital stock spun-off to the Company shareholders. As to any payout up to $22.5 million, one-third of the payout will be allocated to each such officer, with any payout in excess of $22.5 million to be allocated as follows: Mr. Armes-- 50%, Ms. Tacke--25% and Mr. Diehl--25%.".......

Disclosure: The author is long CSWC.