*NEWS*LEXMARK:$17M FOR TOP 4 EXEC’s……
*NEWS*LEXMARK:$17M FOR TOP 4 EXEC’s……
2007-03-29 at 11:12:00 am #17506
Executive payouts in proxy statement
UP TO $17.26 MILLION FOR TOP 4 UPON EXIT
When Lexmark International recently released its proxy statement, the company provided updated descriptions of its change of control agreements with top executives.Such agreements are common in top companies. And in Lexmark’s case, its top four executives would be eligible to receive compensation valued at $4.16 million to $17.26 million, as of Dec. 31, if one of a number of scenarios occurred, including if the company was dissolved or sold under certain conditions.
A company spokesman declined to comment on the agreements.
According to the filing with the Securities and Exchange Commission, Lexmark defines a change of control in several ways:
• A majority of the company’s board has changed in the previous two years for reasons other than death or disability.
• Any person or group becomes the beneficial owner of 30 percent or more of the company’s outstanding stock.
• The company’s stockholders approve a merger that takes the company private or results in a majority of board members changing or not representing the company’s nominees. The agreements also could kick in if, through the merger, any person or group will hold 30 percent or more of the new company’s stock.
• The company’s shareholders approve a sale of the company.
• The company’s shareholders approve the liquidation or dissolution of the company.
In Lexmark’s case, if a change in control occurred, the company’s top executives would be eligible to receive long-term incentive compensation.
In its proxy, the company calculated potential payments, as of Dec. 31, as if a change in control had occurred.Because such compensation involves stock, the payments are linked to its performance. Shares of Lexmark closed out 2006 at $73.20. They closed Friday at $59.89.By the company’s calculation, CEO Paul Curlander would have received $17.26 million, while chief financial officer John Gamble Jr. would have received $4.16 million.Paul Rooke, who oversees the company’s laser printer business, would have received $5.62 million, while Najib Bahous, who oversees the inkjet business, would have been compensated $5.27 million.If after a change of control the employees were terminated without cause, the agreement would require millions in cash severance packages to be paid.Had such an action occurred as of Dec. 31, the amounts paid would have totaled $7.18 million for Curlander, $2.72 million for Gamble, $3.18 million for Rooke and $1.84 million for Bahous.The company also would have provided Curlander, Gamble and Rooke with at least the same amount in benefits such as medical insurance for an additional three years. Bahous would receive the benefits for two years.The compensation in Lexmark’s change of control and general employee agreements is far from extraordinary compared to notable recent cases, such as that of former Home Depot CEO Bob Nardelli.Nardelli resigned earlier this year under intense criticism but left with a severance package valued at $210 million.While Nardelli’s payout didn’t relate directly to a change of control, others have, including the highly publicized ones of James Kilts of Gillette Co. and John Kanas of North Fork Bancorp.Kilts’ contract called for a payout of more than $160 million when Gillette was absorbed into Procter & Gamble in 2005.Kanas was to receive more than $200 million based on change of control provisions activated when North Fork was sold to Capital One Financial last year.Commonly called golden parachutes, these contract provisions are generally billed by corporations as a way to retain top-level executives, who would otherwise have difficulty finding similar employment should they be terminated after a change of control.They also can be seen as methods to reduce the likelihood of unfriendly takeovers.