There are no magazines about vice chairmen and no suck-up profiles in Fortune about them. They don’t write advice books, because no one cares what they have to say. No one even cares if they show up in the office. In short—except for one slight drawback—they have the greatest job in businessI was reminded of that piece when I came across this exhibit in the 10-Q that PVH filed a short time ago. Under the agreement, Fred Gehring, the former Executive Chairman (and before that the former CEO) of Tommy Hilfiger, was demoted to Vice Chairman on Aug. 1. That’s not quite how the company put it in the July 31 press release, but that’s how most Continue reading "PVH Corp."
“Our former Chief Executive Officer’s management style and temperament created a pressurized operating environment at the Company, where challenging targets were set and achieving those targets was a key performance expectation…Our Continue reading "Will Hertz’ former CEO wind up having to clawback?"
“Since late 2012, a short seller has made and continues to make allegations regarding the Company and its network marketing program. The Company believes these allegations are Continue reading "Herbalife v. Ackman: Who’s manipulating who?"
While government service is commendable, we question the practice of our Company providing accelerated vesting of equity-based awards to executives who voluntarily resign to enter government service….We oppose compensation plans that provide windfalls to executives that are unrelated to their performance. For these reasons, we question how our Company benefits from providing Government Service Golden Parachutes. Surely our Company does not expect to receive favorable treatment from its former executives.”Goldman Sachs, in particular, is well known for its executives who leave to enter government service. The list is so long — from former treasury secretary Hank Paulson to former New Jersey Senator Jon Corzine to a variety of other government officials at different levels — that someone has compiled a pretty comprehensive run-down on Wikipedia. Last year, Massachusetts Senator Elizabeth Warren specifically targeted Citigroup for similar practices, questioning in this article for Politico, why there seemed to be a revolving door between the banking giant and the Obama administration. Wikipedia entries for both JP Morgan Chase and Morgan Stanley also note the various former employees who have gone on to government service. To be clear, the union isn’t asking for the practice to end: it’s just asking for the companies to issue a report on the practice, which the union says “provide needed transparency for investors about their use.” All four of the banks encourage shareholders to reject the proposal, and according to this article from the New Republic in February, three of the four banks (all but J.P Morgan Chase) sought to exclude the proposal from their proxies. In its response, Goldman Sachs says that “We do not agree with the premise of the proposal, which seems to penalize senior employees for choosing to accept government positions in service of their country.” In its response, Morgan Stanley says that it has “a strong culture of public service and is committed to providing skills and resources to create a lasting civic impact. Our employees may be uniquely positioned to contribute meaningfully through governmental service. The Governmental Service Termination clause avoids penalizing those highly qualified employees, at any level in the Company, who desire to leave the private sector to pursue governmental service.” Citigroup says that depending on the meaning of senior executive, such a report could cover as many as 7,500 of Continue reading "Golden parachutes for government service?"
Notwithstanding the proliferation of technology and technology-based risk and control systems, our businesses ultimately rely on human beings as our greatest resource, and from time-to-time, they make mistakes that are not always caught immediately by our technological processes or by our other procedures which are intended to prevent and detect such errors. These can include calculation errors, mistakes in addressing emails, errors in software development or implementation, or simple errors in judgment. We strive to eliminate such human errors through training, supervision, technology and by redundant processes and controls. Human errors, even if promptly discovered and remediated, can result in material losses and liabilities for the firm.When we first read this, we couldn’t help but reminisce about our college days listening to Depeche Mode. Not only was this the first time that a company like Goldman mentioned its employees like this in one of their filings, it was also the first time the company mentioned the possibility of human error. Several other large financial institutions have mentioned human error in passing, based on our review of the documents. Given that this was a risk factor, one way to look at this is that there’s some big mistake — due to human error — that has not yet come to light yet. Or, perhaps the folks behind Goldman’s 10-K were simply feeling a bit philosophical. Continue reading "Goldman Sachs says “People are People”"
The 2013 Agreement provides that if Mr. Jeffries’ employment is terminated following expiration of the term (as a result of delivery of notice to terminate the term by either party as described above), by the Company for Cause, by Mr. Jeffries other than for Good Reason, or due to his Retirement, Mr. Jeffries will only be entitled to: his then current accrued and unpaid base salary through the date of termination, any earned or accrued and unpaid bonus or other incentive compensation for any completed fiscal years preceding the year of termination, any previously deferred compensation, reimbursement of reasonable expenses; and any other benefits and payments to which he is then entitled under the Company’s employee benefit plans (collectively, the “Accrued Compensation”).Yesterday’s announcement isn’t really clear on whether this provision kicks in. But in this Bloomberg story on Jeffries’ resignation, his exit package was valued at $27.6 m. Looking closely at the proxy and at yesterday’s 8-K, we think the number is actually $32.7m plus the additional $5.5m promised in yesterday’s filing. Granted, he did run the company for 20 years and presided over some amazing growth. But as we’ve documented over the years, he’s also been unusually well compensated in many different ways, including the frequent private jet usage.
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“Ms. Hilado’s offer letter with the Company provides for (i) a starting annual base salary of $545,000; (ii) beginning in 2015, eligibility to participate in the Company’s annual cash incentive plan, with a target bonus opportunity equal to 100% of base salary; (iii) a new hire long-term incentive equity grant with a target value of $5,730,000, consisting 75% in value of performance-share units, the terms of which were described in Item 5.02 of the Company’s Current Report on Form 8-K filed on July 3, 2014, and 25% in value in options subject to vesting in equal annual installments over a five-year period; (iv) a one-time award under the Company’s merger success award plan, to be settled in cash or Company ordinary shares of an equivalent fair market value (in the discretion of the compensation committee), with a target value of $5,000,000 and a maximum award value of $10,000,000, based on the Company’s achievement of pre-established goals during the performance period of July 1, 2014 through December 31, 2017; (v) a sign-on bonus of $3,000,000, payable in two equal installments on March 15, 2015 and on the first anniversary of Ms. Hilado’s hire date (subject to repayment under certain circumstances); (vi) a sign-on grant of restricted share units valued at $3,000,000, to vest in four equal annual installments; and (vii) eligibility to participate in the Company’s deferred compensation plan.”We would like to point out that much of Hilado’s promised payouts are linked to equity, with its potential downside, and to performance goals spread out over periods of up to five years.
Actavis has a history offering hefty amounts of money to its top executives. For instance, ahead of the July 4 holiday , the company filed an 8-K and buried below a bunch of disclosures related to its merger with Forest Laboratories that it was handing out “merger success” and related awards to seven top executives. The amount? Staggering payouts of up to $185.6 million. One other thing caught our attention in the filing: while Actavis is based in Ireland via a so-called tax-inversion deal it did in 2013, the press release announcing her appointment notes that she will be based in Parsippany, NJ. Over the years, we’ve written about payouts offered to dozens of newly appointed or promoted executives, including this story with mind-boggling potential payments of more than $29 million to newly appointed president of EBay Inc. unit PayPal Inc., Daniel Schulman. Still, the $22million in potential payouts to Hilado have to be ranked among the highest compensation amounts promised to incoming executives in recent times. Once the employment contract is actually made public, it should be a bit more clear.
“You may characterize your departure from the Company as voluntary and communicate the same to your team and peers, however, any written communications related to your departure must be pre-approved by Google’s Communications representative; provided, however, that such communications shall not include any communications generated by Softbank on or before October 17, 2014 relating to your new position with Softbank.”Based on our experience reading lots of separation agrements, companies don’t usually pay large chunks of money (or in this case, forgive a large chunk of money) to an outgoing executive when the move is entirely voluntary. Clearly, things are not as they seem here.