Lithia Motors’ Emperor for Life

It’s been awhile since we’ve come across the type of 8-K we saw from Lithia Motors yesterday. More specifically, the type of language we saw in the filing which proffers up lifetime benefits to its soon-to-be former Executive Chairman, Sidney DeBoer. DeBoer, who to be fair, built Lithia Motors into a company that has clearly performed well for investors, including DeBoer over the years. But judging by yesterday’s 8-K, that’s still not enough. That’s because the filing spells out a $1.05 million payment to DeBoer for the rest of his life. That’s in addition to a $42,000 a year car payment. Again, for the rest of his life. There’s also a $210K a year payment for serving on the board of directors. Yesterday, in his hometown paper, the Ashland Daily Tidings, DeBoer actually talked about the pay cut. “It’s a huge pay cut for me'” said DeBoer, who is Continue reading "Lithia Motors’ Emperor for Life"

PVH Corp.

Over 10 years ago, I wrote this piece for Slate about how being named Vice Chairman of a company just might be the greatest job in business. Here’s a brief snip:
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 business
I 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."

And now: the game changer bonus

Quick: what do you think about when you hear the words “game changer”? We doubt that it’s a hefty bonus for tobacco industry executives. And yet, judging by this 8-K filed by Reynolds American Inc. yesterday, that’s exactly what it is. Needless to say it was buried in a lot of legalese (read: boring language). But the words “game changer” were actually used to describe the bonus, which is a first when it comes to SEC filings. Based on yesterday’s filing, the new bonus was designed as a “one-time performance-based cash awards to all employees of RAI and its subsidiaries designed to maintain focus on the successful integration of the recently completed acquisition of Lorillard, Inc.” The company closed its $27 billion acquisition of Lorillard last month. Given that RAI and its subsidiaries have about 5,300 employees (as of the most recent 10-K), this new bonus may very Continue reading "And now: the game changer bonus"

Will Hertz’ former CEO wind up having to clawback?

You’ve probably already seen the news about Hertz Global Holdings finally filing its much delayed earnings. Yesterday, after the markets closed, the company filed its delayed 10-K for 2014, which included restated results for 2012 and 2013 and its first quarter 10-Q for 2015, bringing the company up-to-date in its filings. The news sent the stock, which had dropped over 30% since the beginning of the year, up about 12% on the news. The company’s CEO, John Tague, said yesterday that “Today’s filings are an important step forward, and our attention is now on realizing Hertz’s full potential.” But buried in the nearly 400 pages filed yesterday was this disclosure, which we first highlighted for footnotedPro subscribers yesterday:
“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?"

A very expensive year for Hertz

How much is a year of, presumably, hard work worth? At Hertz Global Holdings, the answer is north of $8 million. Last week, Hertz filed this 8-K disclosing severance details for Hertz Equipment Rental Corp. (HERC) CEO Brian MacDonald. As both this press release and the filing noted, MacDonald stepped down on May 20. Unlike similar announcements and 8-Ks, the “personal reasons” or “more time with the family” language wasn’t trotted out. Ditto for the language about “no disagreements” that is standard fare in most 8Ks announcing a sudden departure. Indeed the press release, didn’t even have the perfunctory quote from the company’s CEO praising MacDonald. Instead, CEO John Tague was quoted as saying that newly appointed HERC CEO Larry Silber “will reenergize HERC’s performance on the topline and importantly in dollar value utilization, which is a key performance driver for this industry.” Ouch! But MacDonald shouldn’t be too Continue reading "A very expensive year for Hertz"

Herbalife v. Ackman: Who’s manipulating who?

It’s been nearly 2 1/2 years since Pershing Square’s Bill Ackman made a 300-page presentation outlining his short position in Herbalife. Since then, countless pixels (not to mention video footage and actual ink) has been devoted to the seemingly never-ending battle, complete with dueling websites (see this company site and this anti-Herbalife site). Here at footnoted, we haven’t really spent too much time on the back-and-forth volleying. Still, a disclosure in the 10-Q that Herbalife filed yesterday afternoon — the same day it reported better-than-expected results that are causing the stock to surge today — caught our attention. Although the disclosure didn’t mention Ackman by name, it’s hard to imagine who else the company could be talking about. Here’s a snip:
“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?"

Warning signals in Yelp’s 10-K

Back on March 2, we published a report on Yelp that looked at some of the tough new language that we found in their 10-K. Given Yelp’s earnings release on Wednesday and the sharp decline in the stock price yesterday, we wanted to make the report available to all of our footnoted readers. You can read the report here for free. Just a reminder that there are no accidents in SEC filings. Everything is there for a reason.

Pier 1’s Not-So Confidential Agreement

Hardly a day goes by when we don’t notice a “Confidential Agreement” attached as an Exhibit to an SEC filing. The irony, of course, is that once it hits the EDGAR database, it’s not exactly confidential any longer. Take this “Confidential Retirement Agreement” that was attached to the 10-K that Pier One filed on Tuesday. The agreement was with former CFO Charles “Cary H.” Turner, who suddenly “retired” on Feb. 10, the very same day that the company “revised” its financial guidance for fiscal 2014. Just to be clear, by revised, we mean sharply lowered. The stock dropped 30% on the news. And much of the news coverage pinned the blame on Turner for not getting those all-important projections correct. The headline on the Bloomberg story even used the word botched to describe his performance. Turner may have been the fall guy in the media, Continue reading "Pier 1’s Not-So Confidential Agreement"

Golden parachutes for government service?

We’re deep into proxy season, with the deadline for companies that are on a calendar year only 13 days away (9 if you only count business days). And we’ve noticed an interesting shareholder proposal this year that’s on the ballot at four different financial services powerhouses: Citigroup, Goldman Sachs, JP Morgan Chase and Morgan Stanley. The proposal by the AFL-CIO Reserve Fund uses a phrase we haven’t seen before in SEC filings: government service golden parachutes, which the union describes as rewards for employees who leave their jobs to become government employees. Here’s a key phrase from the proposal filed in the Goldman Sachs proxy that was filed a week ago:
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?"

An inverse relationship at J.C. Penney

Earlier this week, beleaguered retailer JC Penney Co, filed its proxy statement. Given some of the high-profile comings and goings at the company over the past few years, we’ve paid pretty close attention to their proxy and this year’s version didn’t disappoint. For the past few years, the company has at least one — and sometimes two — executives who have received hefty severance packages for relatively short stints when whatever magic potion they were pedaling failed to turn the company around. This year’s proxy didn’t disappoint: the company disclosed for the first time that former CFO Kenneth Hannah, who occupied the CFO spot for less than two years, collected $2.3m in severance. But far more interesting to us was the high-flying ways of former CEO Myron Ullman. As the filing helpfully points out in footnote 5 to the summary compensation table, Ullman spent $896,010 on personal use of the corporate jet in 2014. While that’s slightly less than the $913,488 spent in 2013, it’s also for less time, since Ullman was replaced on Nov. 1, 2014. It’s also more than twice as much as what former CEO Ron Johnson spent on personal travel during his last year at the helm. The last time that Ullman was at the helm at JC Penney, his personal jet usage was $362,682, which means the 2014 figure is 1.5 times higher. As a general rule of thumb, when personal usage of the corporate jet begins to approach $1m, it should be a big red flag. Exhibit A? The $1.1m that former Abercrombie & Fitch CEO spent on his personal plane use in 2009. Keep in mind that it costs about $5,000 an hour to operate the typical corporate, so we’re talking about a lot of hours spent flying to various vacation spots. UPDATE: As disclosed in the proxy (and in prior proxies dating back to 2008), the company explains the hefty jet usage as being related to Ullman’s “physical condition that significantly limits his mobility”. We won’t do it here, but just imagine if you will a simple graphic that plots Ullman’s personal jet usage and the company’s sagging stock price over the past five years. Talk about an inverse relationship! Over a decade ago, NYU Professor David Yermack wrote this paper that talked about excessive corporate jet usage. That paper got a lot of attention at the time, especially from institutional investors. Yermack followed up in 2013 with another paper that said that airplane tailspotting could be a profitable trading strategy. Even for cynics like us, it still seems odd to be talking about excessive personal jet usage in 2015.

Hunting for Perks in Proxy Season

Proxy season is heating up, and every year we come across perks that don’t quite fit the mold. Once upon a time, we used to write about these sorts of perks more regularly. But lately, to borrow a line from the hit movie, Frozen, we tend to “Let it Go.” Still, one of those unusual perks remains close to our heart: the company-owned sports lodge. That’s because back in 2008, we discovered  A. Schulman’s fish camp, which won Footnoted’s “Worst Footnote of 2008.” There was also the  executive dude ranch that we wrote about in 2012. We suppose that reasonable people might disagree on the need for this type of thing. After all, when it comes to perks and the “business reasons” for doling them out, there’s probably not much difference between a sports lodge, a country club, and a downtown lunch club. Still, when we read the proxy that ArcBest Corporation filed, we thought it was worth sharing. Granted, this isn’t a new disclosure for the company, which was formerly known as Arkansas Best Corp. But it strikes us as odd that the company’s “lodging facility and related hunting property” appears to benefit just one person: Chairman of the Board and former CEO, Robert A. Young, III. In a footnote to a footnote in the Director’s Compensation Table on page 18, Young’s usage of the lodge and hunting property is described as “infrequent.” Instead, the company says Young’s perks, which include several other things, including spousal travel to company events and the help of an executive assistant on personal matters, totaled $52,850. What’s particularly interesting is that a quick look at prior proxies — the hunting property shows up each year dating back to 2007 — shows that Young, who stepped down as CEO nearly a decade ago — always seemed to be the only person who used the property. Although the proxy states that the hunting lodge is owned for business entertainment purposes, nothing in any of the company’s filings going back to 2007 suggests that the lodge was (or is) ever used for that purpose. For example, it’s never mentioned under the “Properties” section in any of the company’s 10-Ks, including the most recent one, which was filed on March 2. The company-owned property is mentioned exactly one time each year in ARCB’s SEC filings, and that’s to say that Young uses it personally. We tried finding images and other posts about the Arcbest property, but came up empty-handed, which seems surprising in an era of Facebook, Twitter, Instagram and Tumblr. Surely, if it really is used for business purposes, it would show up somewhere.  

Goldman Sachs says “People are People”

Buried in the 405-page tome that Goldman Sachs filed at 9:44 pm last Friday — several hours after the SEC closed its electronic window, which means the filing did not become publicly available until Monday morning — was a very interesting (and new) disclosure that provided some insight into the company’s view of the world and should be welcome news to Goldman’s 34,000 employees. In an age of high frequency trading and big data, the company said that human beings are the company’s greatest resource. This disclosure came buried at the bottom of a 1,500 word risk factor on cyber-security attacks — a risk factor that has grown significantly at many companies this 10-K season, mostly because of the growing number of high-profile attacks on companies including Sony, JP Morgan Chase, Home Depot and Target. While little of Goldman’s risk factor related to cyber attacks was new, the part about humans was. Here’s the new disclosure in its entirety:
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”"

A very good deal at Ross Dress for Less

Anyone who’s ever shopped at a Ross Dress for Less knows what to expect: fluorescent lights highlighting piles of off-price clothes and shoes. Shopping there is more about the hunt for a good deal than anything else. Judging by this 8-K filed earlier today, a former Ross executive has found an unusually good deal — one most Ross shoppers could only fantasize about. For the next two years, Doug Baker, the former chief merchandising officer at Ross’ dd’s DISCOUNTS, will collect his regular base salary of $960,000. He’ll also get bonuses — up to 75% of his base salary — and accelerated vesting in stock. All told, it works out to just over $7 million. In a curt, one-sentence filing back on Jan. 28, the company disclosed that Baker’s employment had “terminated” that day. The filing didn’t provide further details but a three-paragraph press release seemed to downplay the departure by noting that he was “leaving” the company, with Ross Executive Chairman Michael Balmuth praising Baker for “numerous contributions over the years as a merchandising executive at both Ross Dress for Less and dd’s DISCOUNTS.” In this Women’s Wear Daily story (which is behind a pay wall), Baker’s departure was described as a firing, which makes sense to us. After all, you rarely find 20-year executives departing the very same day the announcement is made. What is clear is what he could get over the next two years — for doing nothing. Usually, companies require the executive to remain with the company under the euphemistically titled “consulting” agreements. But in this case Ross appears to have dispensed with that pretense. The only thing that Baker is actually required to do under the agreement is not compete and not try to hire any Ross executives or employees. Continue reading "A very good deal at Ross Dress for Less"

Straight talk in filings?

SEC filings are not exactly known for their straight talk. Executives resign to spend more time with their families. And there’s never (ever!) any disagreements when the executives or directors or the accounting firms that audit the companies step down suddenly. In other words, it’s not exactly the “Straight Talk Express” So you can imagine our surprise when we came across this 8-K that The Fresh Market filed late in the day a few weeks ago. In it, the company said it “had terminated” the employment of CEO Craig Carlock. I think that most people would read that to mean he was fired. Trust us on this: that kind of language is very rare. It’s also much more direct that what the company used in the press release that announced Carlock’s sudden departure on Jan. 12. In that release, the company said that Carlock “has left” and then included some nice statements about what he had accomplished since becoming CEO in 2009. In other words, pretty typical fare. But then we were surprised all over again when we came across this 8-K that the company filed last week. In that filing, the company spelled out Carlock’s severance terms and let’s just say that they don’t really seem like the type offered to the typical person who has, um, “left”. Under the agreement, Carlock gets two years of salary, a pro-rated portion of his bonus, two years of healthcare coverage, continued vesting on several different equity awards. The cherry on top? Continue reading "Straight talk in filings?"

CFO Picks Doughnuts Over Steaks

We noticed a strange coincidence in the filings earlier this week made by two different restaurant companies. First came this 8-K filed by casual steak chain, Texas Roadhouse Inc. on Jan. 12 , in which it disclosed at the very bottom of the filing that Price Cooper IV had renewed his employment agreement on Jan. 8. Later that same day, Krispy Kreme Doughnuts Inc. announced that Cooper had been named its new CFO. It struck us a bit odd. Why would Cooper renew his employment agreement with Texas Roadhouse, a company he had been working at for the past nine years, when it seems pretty likely that he had already sewn up his deal with Krispy Kreme? Indeed, Texas Roadhouse’s filing noted that “we entered into an employment agreement on similar terms and conditions with G. Price Cooper, IV, to serve as Chief Financial Officer, before he announced resignation on January 9, 2015.” Now obviously the filings don’t speak. But we wondered whether this was some sort of negotiating tactic for Cooper to wrangle a better deal out of Krispy Kreme. Although Krispy Kreme has yet to disclose Cooper’s compensation, outgoing Krispy Kreme CFO Douglas Muir received total compensation valued at $1.2 million for fiscal year ended in February 2014, including a salary of $376,175 and equity awards valued at about $425,000, according to its proxy filing from last May. According to Texas Roadhouse’s most recent filing, Cooper’s total compensation was $441,065 in 2013, compared with $1. Continue reading "CFO Picks Doughnuts Over Steaks"

SEC filings stats in 2014: a look back

Each year, once the numbers become available, we like to take a look at some of the SEC filings stats for the prior year. As we tweeted on Friday, there were 668,635 filings made to the SEC in 2014, which represented a modest uptick from the 655,846 filings made in 2013. But those numbers really only tell a small piece of the story. As we do each year, we asked the folks at Morningstar Document Research to help us crunch the numbers to figure out which date is the busiest day for filings (Valentine’s Day…again), which companies filed the most filings (pick your favorite large financial services firm), and which companies filed the largest ones. LendingClub Corp., which IPO’d in December, was the “winner” there. We usually look at the 10 largest filings of the year, and this year, LendingClub was responsible for all 10. Based on our research, those 10 filings amounted to nearly 73,000 pages of text! Other than the junior associates who wrote those documents, we have to wonder how many people actually read them! While we’ve always focused on large filings, recent research shows that something as simple as the size of a 10-K can be a good indication of confusing financials, even if you never open the actual filing and try to dive in. With that in mind, we found it interesting that Hertz Global Holdings filed the single largest 10-K last year. The 10-K that they filed on March 19, 2014, weighed in at just under 2,000 pages. Regular readers of footnoted know that we like to focus on the Friday Night Dump, where we focus on filings made after 4 pm est on Fridays. Of the 74,907 8Ks filed in 2014, just over 8% were filed after 4 pm on a Friday, which shows that many companies continue to file late on a Friday, despite the prevalence of Twitter and the so-called 24-hour news cycle. Indeed, we now publish a separate feed for our Pro subscribers that focuses on those late Friday disclosures. Continue reading "SEC filings stats in 2014: a look back"

A big sendoff for Abercrombie’s CEO

By now, you’ve undoubtedly heard the news about the sudden retirement yesterday of Mike Jeffries, who had been Chairman and CEO of Abercrombie & Fitch after more than 20 years of running the company. You may have even seen the news that Jeffries would be getting $5.5m in “cash and benefits continuation” according to the 8-K that the company filed late yesterday. We wanted to take a closer look because Abercrombie and Jeffries has been something of a frequent flyer here at footnoted over the years. Indeed, we counted 37 separate items that we’ve written about Abercrombie over the years, including this pearl from 2010 that had the company paying Jeffries $4m not to use the corporate jet as frequently as he did in 2008. What we found is that if you read yesterday’s 8-K carefully, you realize that the $5.5m is really just the beginning. The company says that much in the 8-K with the words “in addition” before disclosing the $5.5m. But you have to go back to Jeffries’ employment agreement from last December and the proxy statement to get additional details. We wrote about the amended agreement last December (subscribers only), noting that the new agreement provided $6m in long-term incentives. But there’s another wrinkle here. The 2013 agreement is valid through Feb. 1, 2015. Since Jeffries stepped down on Dec. 8, 2014 that leaves some questions, as outlined in the 2013 agreement:
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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What was Visa waiting for?

Disclosure practices of some companies don’t make sense, especially when it comes to their executive compensation. Take credit card giant Visa Inc., for instance. Over a year ago, on May 23, 2013 to be exact, the company announced via a press release the appointment of Ryan McInerney as the company’s president. On the same day, the company filed this 8-K, with his compensation details, including his $2 million signing bonus, which we covered here. So far, so good. Or so we thought, until we clicked open one of the exhibits filed with the company’s latest annual report on Nov. 21. In that exhibit and another related one, the company disclosed payouts running into millions of dollars to its executive vice president of Technology, Rajat Taneja. The exhibits were dated Nov. 6, 2013. The problem? This is the first time that the company disclosed the compensation details of Taneja, although his appointment was disclosed more than year ago, on Nov. 18, 2013. (The company also filed its proxy the same day as its latest 10-K on Nov. 21, 2014, detailing his compensation.) Visa’s disclosure was no less earth shattering as far as payouts to Taneja are concerned. In those exhibits, the company said Taneja, the former technology chief of Electronic Arts Inc. — the producer of the Madden and FIFA video games — will get a whopping make-whole equity award valued at $11 million; a one-time cash sign-on bonus of $2 million in lieu of incentives from his prior employer; a long-term performance bonus target of $4.56 million a year; a salary of $750,000 a year; with bonus target of 125% of base salary, with the maximum at 250%. To find out how much he actually made during the company’s fiscal 2014, which ended Sept. 30, we turned to its latest proxy. Not surprisingly, the company valued his total compensation at $14.4 million, including prorated salary of about $640,000; bonus of $2 million; $11 million in equity awards, consisting of stock awards of $8.25 million and option awards of $2.75 million. We wonder why the company took so long to disclose the compensation details of a named executive officer, considering that it had the chance to disclose the details in its previous compensation proxy, filed on Dec. 13, 2013. Or in any of the other filings it has made over the past year. Happy Thanksgiving!  

Is Actavis’ new CFO Really worth $22 Million?

When it comes to executive compensation, do the board members and compensation consultants who dole it out ever think there’s such a thing as too much of a good thing? That’s the question we found ourselves asking after reading the 8-K that Actavis plc filed late Wednesday. If you are a footnoted regular, you would know that we pay close attention to filings that come in after the close of the markets, especially on Fridays. So when Actavis, the Ireland-based pharmaceutical giant Actavis arrived a little after 5 p.m. on Wednesday, we sent out a quick note to our subscribers, highlighting what seems like incredibly generous compensation for incoming CFO Maria Teresa Hilado. In fact, we were pretty surprised that this wasn’t filed late on a Friday, given the numbers involved. Hilado, who is leaving her job as Pepsico’s Treasurer to join Actavis in December stands to make as much as $22 million, based on our reading of the 8-K. Of course, since Actavis didn’t include the employment agreement, there’s some guess-work involved in getting to that number. Here’s how the company described the compensation in the filing:

“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.

What’s $8m to Google?

For most of us, $8 million is a lot of money. But for a company the size of Google, it’s probably safe to say that it’s the equivalent of sofa change. Still, even we were surprised by this exhibit attached to the 10-Q that Google filed yesterday. In the letter, which was dated July 18, 2014, Google agreed to forgive an $8m cash award that former Chief Business Officer Nikesh Arora was supposed to pay back within 30 days if he left the company prior to April 25, 2015. The condition was spelled out pretty clearly in this letter dated April 27, 2012. In that letter, the company said it made the $8m award to Arora “after discussion with Nikesh and in light of his personal circumstances”. Arora’s last day at the company was Sept. 7, which seems to indicate he should have been writing Google a check for $8m. So what prompted Google’s sudden change of heart? It’s hard to tell just based on Google’s filings and based on our past experience, the company never comments on anything in their SEC filings. A separate separation agreement that was also attached to the Q filed yesterday doesn’t provide any additional insight (though it does note the existence of something called the GCard, which appears to be some sort of Google credit card that has long been rumored). One other interesting thing that we noticed: while Google announced on July 17 that Arora was leaving to join Softbank to become a Vice Chairman and CEO of Softbank Internet and Media and various media reports, including this one from the FT described Arora’s hiring as a “poaching”, the July 18 agreement implies that Arora’s decision to leave Google wasn’t entirely voluntary. How else to explain this language in the agreement?
“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.