Of particular note, the total compensation for William C. Rhodes, III, AutoZone’s Chairman, President, and CEO, zoomed from $3.8 million in fiscal year 2010 to more than $11.36 million in fiscal 2011.

The increases came in the form of both cash and equity, but – still – it seemed like such a steep increase that the matter caused us to stop for a while and dig for some answers. Now Rhodes is no newcomer to the company: He worked his way up through the ranks over the past 16 years and has been the president, CEO, and a director since 2005. Still, why would his compensation jump nearly three-fold in one year?

As it turns out, there are several reasons. Rhodes’ base salary rose to $992,308 (a raise of more than $71,000), and his non-equity incentive bonus jumped to more than $2 million (an increase of nearly $436,500). On the equity side, his stock awards jolted from last year’s comparatively paltry $21,335 to more than $6.6 million for FY 2011. In addition, option awards increased by more than $415,000, to almost $1.58 million.

Last December, the board gave Rhodes a “one-time award” of 25,000 performance-restricted stock units for the stated purpose of “[motivating] continued high performance while enhancing the retention characteristics of [his] compensation package.” We thought it was worth including the vesting criteria at the bottom of p. 28 of the proxy, in part because the goals were actually pretty clearly defined and the hurdles actually seemed real — something that’s pretty rare in the filings:

We’re used to seeing companies say that they’re tying compensation to performance, but we’re not used to seeing them deliver with such aggressive goals and metrics as AutoZone put in place.

With the stock currently trading at $330.19 and the diluted earnings per share number for 2011 at $19.47 (disclosed in the 10-K that AutoZone also filed yesterday – a jump from the diluted earnings per share number of $14.97 for fiscal 2010), we can’t quibble with the proxy’s claim that “AutoZone sets challenging financial and operating goals, and a significant amount of an executive’s annual cash compensation is tied to these objectives and therefore ‘at risk’ — payment is earned only if performance warrants it.”

Most of the other named executive officers also got turbo-charged boosts to their compensation, although their increases tended to be in the range of $350,000 to $450,000 and come from a combination of raises, cash bonuses and stock options. The exception was Robert Olsen, Corporate Development Officer, whose salary actually dropped a few thousand dollars. But Olsen got a bonus of more than $66,000, and he got nearly $1.2 million in stock awards. The proxy explained that last January, the compensation committee gave Olsen 4,800 restricted shares, which will vest equally on the second and third anniversaries of the grant, so long as he’s still working for the company.

AutoZone’s stock is trading more than 40% higher than it did a year ago, a number that’s sure to please shareholders in light of the market’s tumultuous year. Consequently, they may not care about the sudden acceleration in executive compensation, so long as the company’s profits and stock price keep climbing. We’ll find out for sure after the votes are tallied at the upcoming annual meeting, set for December 14.

Image source: hauke.berlin via flickr

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Mr. Dell reimburses the company for costs related to his or his family’s personal security protection. Reimbursements for this purpose in Fiscal 2011 totaled approximately $3,263,448.

While the disclosure that Chairman and CEO Michael Dell reimburses the company for these costs isn’t new — the first reference we found was in the proxy filed in June 2006 — this is the first time that we could find an actual amount attached to the disclosure. In the past, the company simply noted that Dell reimbursed the company without providing a dollar figure. And last year, Dell seems to have skipped this issue all together.

Now we’ve been pretty critical of Dell in the past (see here for example) but we think this sort of thing is gold-star worthy, especially in light of some of the other security-related disclosures we’ve read these past few months, including the one at Amazon.

But it also makes us wonder about how accurate these security costs really are. Both Bezos and Dell have high profiles and presumably need similar levels of security for their families and multiple residences. So does Oracle (ORCL) CEO Larry Ellison, whose company spent $1.4 million on his personal security last year.

So why did Dell’s security cost twice as much as the security for Bezos and Ellison? Come to think of it, other security costs we’ve seen this proxy season also seem to be in the mid $1 million range. Does spending about $1.5 million on security for a CEO seem more palatable than spending over $3 million? And in any event, why can’t more of these folks — all of whom certainly have enough money even if it is a $3 million tab — pay for this perk instead of relying on shareholders to pick up the tab.

We’ll jump off our soapbox now and leave you to start thinking about the long holiday weekend.

It’s a holiday weekend, but the SEC remains open until 5:30 tonight. Which companies will visit the Friday night dump? FootnotedPro subscribers will be kept in the know, even if they’re already at the beach.

At Nike, the new policy is laid out in an exhibit to the 8-K the company filed late yesterday. To kick in, the company must first and foremost have restated its financials “due to the material noncompliance of the Company with any financial reporting requirement.”

In addition, the board must make a determination of “Misconduct,” defined as “willful commission of an act of fraud or dishonesty or recklessness in the performance of a person’s duties” — and conclude that the misconduct “contributed to the noncompliance which resulted in the obligation to restate.”

At that point, the board “may require” repayment of “all or part of” any bonus, long-term incentive pay, and even certain gains on option exercises — at least, to the extent they were base on the financial statements that were subsequently restated (or, in the case of option or stock-sale gains, made between the original financial mis-statement and the restatements).

That leaves the board with plenty of discretion, which is at once understandable and problematic. Recoupment, after all, is a tricky thing for corporate boards. If their policies are too broad and discretionary, it leaves open the risk that they’re never used. Ditto if the policies are too narrow.

Then there’s the whole question of due process — one of the bedrock principles of American society, and thus part of the fabric of corporate governance in this country as well. Rigid clawbacks would not only risk being unfair, they would invite lawsuits — we imagine boards would be pretty skittish about demanding repayment absent some real indication of culpability.

But how likely is a board to make that determination alone, pronouncing an executive guilty of willfully committing “an act of fraud or dishonesty or recklessness” without some outside (ideally judicial) confirmation of that conclusion? Trying to go it alone would probably give your average general counsel conniptions.

And so in the end, the language in Nike’s policy (and others we’ve seen) reminds us of the old definitions of dismissal “for cause,” which pretty much took a felony conviction or civil judgment of liability against the misbehaving executive to apply. And by that point, chances are pretty good the board would have sent him packing long before, paying him off under “involuntary termination without cause” provisions.

So we applaud Nike for adopting the policy; it’s a step in the right direction. We’ll have to wait to see how this policy, and others, actually work out when push comes to shove.

Image source: bobosh_t via Flickr

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The agreement was disclosed in an 8-K filed on Tuesday, and it reined in the perks and protections, on not just one but several fronts.

Goldsmith’s pay did go up up, but modestly (by executive standards, anyway): His salary rose to $980,000 from $978,528. His target bonus stayed roughly level at $1.5 million for this year, rising to $1.7 million next year and thereafter. His target equity award rose to $2.64 million from $2.35 million, but now is tied to performance goals. Stock options also rose somewhat going forward.

There’s a clawback provision — not terribly unusual anymore, and this one covers only “excess compensation resulting from materially inaccurate financial statements or any other materially inaccurate performance metric criteria” — so if the financials are bad but it doesn’t translate directly into more pay there’s no clawback.

But on change-in-control provisions, the company seems to have really gone to town: The company won’t pay excise taxes on any golden parachute payments anymore, and it will no longer give him a chance to quit (with severance) in the thirteenth month after a change in control. Severance calculations would be based on his target bonus, instead of his highest recent bonus, and to receive the payout, he’d have to lose his job — a “single trigger” of just a change in control wouldn’t be enough.

The company also tightened the terms for termination absent some sort of deal. Goldsmith would no longer receive extra pension credits on termination without cause, and any payout here would also be based on his target bonus (instead of his highest one). If he’s shown the door after the new four-year contract expires, he gets a year’s pay as severance — but he no longer is entitled to three years’ pay if his contract is simply not renewed.

What makes this all the more remarkable is that City National’s shares haven’t been doing all that badly of late; net income in 2009, however, took a dive from 2008.

As is often the case with the gold stars that we hand out, we can’t promise that City National and Goldsmith are doing everything right. But when it comes to the changes laid out in this 8-K, we like what we see. And it deserves at least a little recognition.

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We’ve come across several companies that are eliminating one of the grossest perks out there – the tax gross-up. Anyone who wades through proxies on a regular basis knows exactly how bad these gross-ups can get, sometimes costing companies millions of dollars.  (Think we’re exaggerating?  Take a peek at p. 66 of AMAG Pharmaceuticals, Inc.’s recent proxy; at “senior management’s request,” the company agreed to pay gross-ups for most of its executives up to a $1 million cap, and pay gross-ups for President/CEO Brian Pereira up to a $3 million cap. And at Merck & Co., Inc. – which is eliminating gross-ups “as soon as possible under applicable arrangements” – if a change in control occurs before February 14, 2011, the company is on the hook to pay gross-ups for its various NEOs that range between $3.1 million and nearly $5.3 million.)

If you think of an ice cream sundae as a metaphor for your basic executive compensation package, you’ve got all the basic stuff – the salary, bonus, stock awards, option awards, non-equity incentive comp, and so forth – in a gigantic bowl filled with six scoops of ice cream, three flavors of syrup, nuts, whipped cream, and sprinkles. The perks are supposed to be the cherry on top, which means that the gross-up payment is a cherry sitting on top of the other cherry. It’s overkill.

So kudos to the companies that are coming around and eliminating the gross-up. Based on recent filings, we’re bestowing our accolades on:

Jo-Ann Stores, Inc. (JAS), which stated in its recent proxy (p.48): “Historically the company provided tax gross-ups in connection with the tax and financial planning services, but this practice has been terminated effective as of January 1, 2010 because we believe it is inconsistent with developing corporate governance standards.”

The Home Depot Inc.’s (HD) recent proxy notes that it eliminated gross-ups on all perks in FY 2009.

Several companies’ 8-Ks announced that they would not enter into any new or amended employment agreements with NEOs that obligate the company to pay a gross-up on any payments that are made if there is a change in control. Those include:

• Cincinnati Bell, Inc. (CBB) (8-K is here);
• Tractor Supply Company (TSCO) (8-K is here); and
• American Campus Communities, Inc. (ACC) (8-K is here)

Meanwhile, PG&E Corporation (PCG) took a hybrid approach. In an April 21, 2010 letter to shareholders, the company wrote that since its last annual meeting the board and compensation committee had “…adopted and implemented a number of policies that have strengthened the Corporation’s governance practices regarding executive compensation.” Its new policy includes: “The elimination of tax gross-up payments made in connection with executive compensation, except for (i) those that are part of benefit programs offered to all employees, and (ii) obligations under pre-existing change in control agreements;”

And AK Steel Holding Corp. (AKS) recently filed a proxy in which it disclosed that, effective January 1, 2010, it eliminated the gross-up payment that it had previously paid to its CEO to cover the taxes he owed on his personal use of the company plane. (See? We’ll even praise baby steps in the right direction!) It noted: “The rationale for this change was to update the Company’s policy with respect to personal use of the Company plane by the Chief Executive Officer to make it consistent with current best practices.”

So – bravo to these forward-thinking companies that are taking steps to improve their executive compensation practices.  If we could, we’d treat you to an ice cream sundae to help you celebrate your gold star award.  (One cherry per sundae, please.)

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But Comp committees often act as though shareholders – like children born in the 1950s – should be “seen, but not heard.” In fact, in most of the SEC filings we read, directors adamantly oppose shareholder “say on pay” resolutions.

That’s not the case, however, at Amgen, Inc., (AMGN) the recipient of today’s coveted footnoted gold star.

Amgen’s recent proxy includes an intriguing – and, so far as we can tell, unique – method that invites shareholders to express their thoughts about how the top executives are paid. At the bottom of page 50, here’s what you’ll find:

Obviously this is a cost-effective way of getting input from shareholders, assuming that they read the proxy and then complete the survey.

But we also found it interesting that Amgen – a huge company whose NEOs earned total compensation packages in 2009 that ranged from $4.9 million to $15.3 million – is the company that’s blazing this trail to encourage shareholders to express their opinions.

We called Amgen’s media relations department to ask why the company took this step and how the response has been to date.  We haven’t heard back yet; however, if we get an answer, we’ll add it to this post as an update.

But regardless of Amgen’s reasons for including this concept in its proxy, we think that finding new ways for shareholders to communicate with the companies they invest in is a smart practice.  Wouldn’t it be great if other companies followed suit?

Special thanks to Amy A. for bringing this gem to our attention.

But being in proxy season, we find that there’s plenty of executives who try to use that logic, too. Proxy after proxy tells us that – “in order to attract the best talent” – companies must allow their executives to whisk around the globe on the company jet (even for personal travel), hold court in a luxury NFL suite, and rake in thousands of “gross-up” dollars to pay their own taxes. The company – and therefore the shareholders – foot the bill for that largesse. However, there are some companies that dare to be different, and today’s Gold Star highlights one of them.

To be sure, it was the sheer brevity of the 16-page proxy that Heartland Express, Inc. (HTLD) filed that initially caught our attention. After all, some companies take 16 pages (no exaggeration) to explain their various bonus plans!

Then again, simplicity rules here. Chairman/CEO Russell Gerdin’s base salary in 2009 was $300,000.  Once you add in all his stock awards, options, 2009 bonus, non-equity incentive plan, perks, gross-ups, and “All Other Compensation” his salary swelled to… $300,000.

How is that possible? The proxy explains this compensatory enigma as follows:

The Compensation Committee believes that Mr. Russell Gerdin’s salary is reasonable compared to similarly situated executives, and that as a direct and indirect holder of approximately 42% of the Company’s outstanding stock, Mr. Russell Gerdin receives an incentive through appreciation in the market value of the Company’s stock….

Okay, one might argue, but Gerdin owns a large stake of the company. What about the other NEOs?

Like Gerdin, in the past few years they’ve received good salaries, but no additional stock, options, bonuses, perks, or other kinds of compensation. The proxy explains:

We believe that stock ownership by our Named Executive Officers helps to align the interests of such officers with the interests of stockholders in maximizing long-term stockholder value…The Compensation Committee believes that the equity ownership of our senior management currently is sufficient to align their long-term interests with those of our stockholders, and therefore did not recommend any stock-based awards to the Named Executive Officers in 2009.

What a novel idea! Pay talented leaders well, give them enough stock so they’ve got a stake in the company’s future success, and then stop!

Pursuant to Mr. Arison’s request Carnival Corporation donated the entire amount of Mr. Arison’s Non-Equity Incentive Plan Compensation to the following relief organizations: UNICEF, the University of Miami’s Project Medishare, American Red Cross, and Save the Children to aid in the relief efforts in Haiti following the devastating earthquake in January 2010.

What’s surprising here is that this is the type of thing a company — particularly one as media savvy as Carnival, which counts over 13,000 followers on Twitter — would tout in a press release as opposed to burying in a footnote to a proxy statement. While Carnival did put out a press release announcing a $5 million corporate donation to Haiti relief efforts back on Jan. 18 and even quoted Arison in the release, the only disclosure about Arison’s personal donation was that footnote in the proxy statement. A Carnival spokeswoman confirmed this morning that Arison’s $2.2 million donation was part of the $5 million announced in January.

If companies start burying good things in the footnotes in their routine filings, what’s next? World peace?

Image source: Carnival Cruise Lines

Last week’s celebrity telethon and other appeals raised a lot of money for relief efforts in Haiti, where current estimates are that the January 12 earthquake in Port-au-Prince affected 3 million people and killed more than 112,000.

We wondered if any publicly-traded companies had filed SEC documents that mentioned efforts to help the beleaguered nation, where there’s a notorious lack of industry and unemployment rates of about 70 percent.

In fact, there have been, and today we’d like to honor them with footnoted’s gold star.   Here are the recipients and a brief summary of their contributions:

• Case New Holland (CNH), which manufactures agricultural and construction equipment, for deploying excavators, wheel loaders, and other equipment to the disaster site within 24 hours, and for offering the use of other heavy construction equipment to the United Nations.  The company also made a cash donation of $50,000 and offered to match employee donations (dollar-for-dollar) up to $100,000.

• Hanesbrands, Inc. (HBI), for supplying humanitarian aid to contract workers and relief agencies. The company has garment factories in Haiti and reported that operations at its plants have resumed. According to its web site, Hanesbrands, Inc. has donated $2.2 million worth of underwear (at wholesale value) to aid agencies for distribution to earthquake victims.  It is also providing food, water, and relief supplies to its Haitian workers.

• Trailer Bridge, Inc. (TRBR), which provides integrated trucking and marine freight service to (among numerous other places) the Dominican Republic.  This company partnered with a shipping customer to provide free transportation and trailers for donated medical supplies to Port-au-Prince.  (It also leased one of its vessels to the Military Sealift Command (MSC), the transportation provider for the United States Department of Defense’s relief efforts; however, this is a contract, not a donation).

• Delta Air Lines (DAL), for partnering with the American Red Cross’s relief efforts in Haiti.

• Dennis Brovarone, a director at Pure Bioscience (PURE), who donated 1,000 shares of common stock to Oxfam Haiti Emergency Relief.

To these companies and Mr. Brovarone, as well as to other companies and individuals who have contributed to the relief efforts – this gold star is for you.

Red Robins are bright, colorful restaurants that keep kids happy with balloons, coloring pages, and visits from the company’s mascot.  Adults get to enjoy the unlimited seasoned fries and the ubiquitous sports-channelling tv’s until the food (which is, happily, several notches above fast food fare) arrives. Of course, just because a restaurant’s popular with customers like me doesn’t mean that its corporate filings are equally appealing to its investors.  But in this case, they may be.

Under the August 15, 2008 restated employment agreement that governed Chairman/CEO Dennis Mullen’s employment until this past Monday, he was “eligible to receive a cash bonus for each of the years ended December 31, 2009, 2010, 2011 and 2012 of not less than fifty-percent (50%) of his annual base salary if certain performance metrics determined by the Compensation Committee for the year ended December 31, 2009 were met.”

The company said that even though the metrics were met for 2009, the Compensation Committee requested that Mullen waive his cash bonus for 2010, 2011, and 2012.  Mullen agreed to do so.  Since he made $725,000 in base salary during 2009, the cash bonus would have been at least $362,500 this year and at least $400,000 in 2011 and 2012.

Instead, the new employment agreement states that Mullen’s bonus eligibility through 2012 “will be based solely on his participation in the Company’s annual incentive plan.” In a trade-off, the Compensation Committee increased Mullen’s annual incentive bonus target to 100% of his base salary, rather than the 90% target he had in 2009.  And it increased Mullen’s base salary from $725,000 to $800,000, although it should be noted that Mullen’s salary did not change in 2008 or 2009.

But there’s more!  It continues:

…the Amendment terminates Mr. Mullen’s right to be paid or reimbursed for personal travel expenses incurred by Mr. Mullen in commuting between Arizona and Colorado, as well as the tax gross-up related to such payments.  The Amendment also deletes the 280G tax gross-up provision…In connection with the Amendment, the Compensation Committee also determined that, when granted, 50% of the annual equity grants for 2010 to Mr. Mullen will be performance-based instead of 100% time-based.

We don’t read a lot of filings that document an executive’s willingness to waive a bonus, give up the right to be reimbursed for personal travel costs and gross-ups, and adopt a performance-based system to determine whether he will receive half of his potential equity grants. But clearly it’s worth a rare footnoted Gold Star.