Correction: The headline on an early version of this post incorrectly said O’Donnell would get “free” clothing instead of discounted clothing. My apologies for the error.

American Eagle Outfitters (AEO) describes itself as offering “high-quality, on-trend clothing, accessories and personal care products at affordable prices.” But while it pours effort into making the case that its clothes are a good deal, it put far less into making clear just how good a deal its retiring chief executive got on his way out the door.

As retirement (or severance) packages go, James O’Donnell is no Samuel Palmisano. But he is getting a handsome sum as he steps down from the top job at American Eagle Outfitters on January 28, a move that was telegraphed at least as far back as March. (Sonya footnoted his replacement’s compensation package the day before Thanksgiving.)

The 8-K that AEO filed to disclose O’Donnell’s package is pretty spare: The only dollar figures in it are $552,500 and $2.21 million — the least and most, respectively, that O’Donnell can make from a one-year post-employment consulting gig he’s getting from American Eagle. (Unusually, any amount over the base $552,500 will be “based on attainment of performance goals for the Company’s 2012 fiscal year,” which sounds more like a bonus to us than like consulting fees, but OK.)

Other elements of the package are described blandly as “his deferred compensation,” “a lump sum retirement benefit determined in accordance with the O’Donnell Employment Agreement,” “severance equal to one year of his base salary less the accrued but unpaid cost of his personal use of the Company aircraft…” and so on.

It turns out that all of this vagueness probably adds up to something like $15.6 million.

The breakdown is fairly straightforward: a year’s base salary, or $1.7 million based on last year’s pay; that lump-sum retirement benefit, or $3.6 million (essentially salary plus bonus “for the highest compensated fiscal year of the prior seven fiscal years,” according to last year’s proxy); a 2011 cash bonus ($612,817 last year); his long-term incentive plan account balance ($1.2 million as of the proxy); his deferred-comp account ($2.4 million, the proxy says); and continued vesting for his stock options, restricted stock units and performance shares ($6.1 million as of last year’s proxy).

His options are underwater, so they’re valued at $0 in the above calculation, which could change if AEO’s stock price rises appreciably in the near future. And as intriguing as it sounds, that “accrued but unpaid cost of his personal use of the Company aircraft” turns out to reduce his severance by just $65,000, according to the text of his Succession Agreement.

Oh, and O’Donnell also gets a lifetime “discount on Company merchandise generally applicable to active employees” for himself and his spouse. The company’s benefits website simply describes its discount for employees as “great.” But judging from various rate-your-employer websites (including comments on this one, as well as comments on Yahoo Answers), it does sound pretty good, if you like the clothes, ranging from 25% for clearance items to 40% or even 50% for regular and new merchandise.

It would take a heck of a lot of $10 tank-tops to make much of a difference for O’Donnell financially, much less for AEO investors, who haven’t exactly had a blockbuster year. Then again, they’ve done pretty well overall since O’Donnell took the helm, so maybe they won’t begrudge him a few $19.99 Mohawk Trapper Hats. And hey, we’d sure love to see him in one.

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Bonus: iPad Watch – We’ve been noticing for a while that departing executives are frequently getting to keep their treasured company-issued iPads. We like Apple’s software and hardware here at footnoted, but for the life of us, we haven’t been able to figure out a legitimate business case for an iPad at most companies (including ours — or believe me, I’d be lobbying to expense mine, stat). Now we’ve found support for our skepticism in an 8-K filed by Smart Balance (SMBL) after 5 p.m. on Friday. According to the accompanying Separation Agreement and Release, departing CFO Alan Gever is being allowed to keep his laptop, iPad, cell phone and cell-phone number. However,

“Prior to his Separation Date, Gever shall provide the Company access to his laptop and Blackberry to purge all Company data and information.”

No mention is made of purging Gever’s iPad — presumably because, like his cell phone, it doesn’t hold any company data or information worth purging.

Image source: AEO clearance website (no, really, it’s for sale — or check out the model with reindeer horns for just $14.99)

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On January 18, we published our 2012 footnotedPro M&A report, listing 10 companies we see as likely deal targets, based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

No, we’re talking about the perks, the creature comforts. You get the soothing music, the minty mouthwash, the comfy chair with a built-in footrest, and at the end, a freebie toothbrush, toothpaste and dental floss, maybe in a serviceable travel case. Similarly, Jost Fischer and several of his colleagues get chauffeured cars, New York City apartments and thousands of dollars toward their health-care premiums.

Fischer is chief executive of Sirona Dental Systems (SIRO), which boasts a lineage back to the maker of the first electric dental drill (yikes!) and now makes and sells everything from those Swiss Army chairs to dental instruments, software and imaging devices. And they do a booming business, to judge by the proxy statement the company filed on Tuesday. As CEO, Fischer made $4 million in the fiscal year ended September 30, up from $3.1 million the prior year. Most of the increase came in the form of a cash bonus ($1.6 million vs. $1.1 million last year) and stock awards ($1.5 million vs. $1.1 million), but Fischer also got a nice grab-bag of perks.

Sirona spent just about $29,000 for Fischer’s annual car allowance, or $2,400 a month —  enough to lease a 2012 BMW 335is convertible, with money left over for gas, according to Yahoo’s calculator — and other executives got between $18,510 and $21,845. Fischer and two other executives also got company-paid apartments: His cost $44,000 last year ($3,667 a month), while Chief Financial Officer Simone Blank’s cost the company $43,600.

Now, as housing perks go, this one isn’t as lavish as some we’ve seen. But what really caught our attention is the fact that the two executive apartments are apparently in New York City. Curiously enough, Sirona’s headquarters is also in New York City, specifically in Long Island City, a section of Queens directly across the East River from Manhattan (and easily accessible by car, subway and even foot if you’re a little ambitious).

The proxy is vague on the details, so we’re not sure whether Fischer and Blank live so far from the company’s headquarters that they have to stay overnight nearby on a regular basis, or if they live in the city and the company is simply subsidizing their annual housing costs. We do know that Fischer has been at the company (and a German predecessor firm) since 2001, and Blank since 1999, so they would seem to have had plenty of time to move within commuting distance. Elsewhere, the proxy notes that the executives get tax-equalization payments “in recognition of the fact that these executives are required to spend an increased percentage of their time outside their respective home countries.”

We also know that these perks aren’t just a matter of corporate inertia: In 2008, the company’s compensation committee decided,

“after review of the competitive market assessment conducted by [consulting firm Pearl Meyer & Partners], to continue the Company’s current practice of providing limited auto, housing and tax advisory services to its named executive officers. These perquisites facilitate the performance of our named executive officer’s managerial duties and provide for competitive total compensation…”

Another executive, President Jeffrey T. Slovin, may have an even pricier home, in Bensheim, Germany, a town apparently known for the “onion cake a la woman from Bensheim” (as Wikipedia would have it) and also home to Sirona’s biggest facility. It’s hard to tell for sure, though, because the company reports spending $113,481 on a combination of Slovin’s rental payments “together with relocation expenses incurred by the Company on his behalf” after he was relocated there in 2010.

Finally, all three executives also get thousands of dollars in the form of a “healthcare allowance,” described like this on page 27:

“The Compensation Committee also determined that the Company should provide payments on behalf of some named executive officers for private health care insurance coverage. In fiscal 2011, payments of €8,750 ($12,212 at an average exchange rate of 1.39570 for fiscal 2011), €3,000 ($4,187 … for fiscal 2011) and $32,983 were made on behalf of Mr. Fischer, Ms. Blank and Mr. Slovin, respectively.”

Clearly, there’s good money in teeth. Luckily, the money’s apparently good enough that shareholders have been doing pretty well, too: SIRO shares returned 17% in the fiscal year covered by the proxy, trouncing the broader market and, on a total-return basis, also beating Sirona’s competition.

Image source: In the jaws of the skull via Shutterstock

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Moving the HQ means moving the top brass as well, and that’s where — in our narrow view — things get pretty interesting. Because Aon is making sure it’s worth its executives’ while to make the move, and it’s splashing out quite a bit of hard cash to smooth the transition, according to the International Assignment agreements it filed with an early-Friday 8-K.

Consider the deal that Chief Executive Greg Case is getting to move across the pond. To start with, his agreement promises him $135,000 a year as an “annual foreign service allowance,” paid as part of his regular paycheck — a raise, in effect, for moving overseas. But he also gets another $336,000 — or $28,000 a month — as an

“annual housing allowance … to be used to pay accommodation and furniture rental costs and associated utility costs (excluding telephone and internet access which are personal expenses).”

Good thing the company isn’t picking up phone and Internet access — I mean, we wouldn’t want to go overboard, right? But the housing allowance will be adjusted annually “to reflect foreign exchange and local market rate variation,” and Case will have to cover his U.S. housing costs himself, should he keep his current residence there.

But housing and, um, foreign service costs apparently don’t begin to cover the difference between Chicago and London. Ergo, Case also needs (and gets) a $90,000 annual cost of living allowance, “intended to replicate your U.S. purchasing power in London and … based on a family size of four.”

Moving involves a lot of one-time costs as well, and it would be foolish to expect Case to cover that with the $1.5 million he made in salary last year, or his $17 million in stock awards. And, to be fair, companies do usually pay the cost of work-dictated moves — but in our experience, typically not in addition to a one-time, $80,000 “relocation allowance” that is “intended to cover all miscellaneous expenses not covered by other provisions included in your relocation package.”

By our tally, that comes to $561,000 a year extra — effectively, a 37% raise over his current salary, and the equivalent of $1,536.99 a day — plus full moving expenses and another $80,000 for all those miscellanea. When he moves back to the U.S., of course, the company will pay transportation and moving costs (and we wouldn’t be surprised to see another hundred grand or so go toward “resettlement costs” or the like.)

In addition to Case’s full attention to the job in London, the company is getting something in return. It can claw back up to a year’s worth of benefits if Case quits to work for a “direct competitor” or does so within a year after he returns from the U.K.

Other Aon executives get similar deals, though in some aspects a little less rich, since it’s presumably cheaper to be relocated when you have a less lofty title. Christa Davies, the company’s chief financial officer, gets a foreign service allowance of $15,000 a year less, though the figure is apparently going to be worked into her target bonus amount, which will be 150% of her salary and the $120,000 allowance. Her housing allowance will be just $252,000 a year, and her one-time relocation stipend just $76,667  – but she’s also getting $34,500 a year in “school tuition allowance” and $23,500 for a car allowance, plus one round-trip ticket to the U.S. per family member per year (and two trips for immediate family members left behind in the U.S., like college-age kids).  Davies also gets another $419,976 for agreeing to waive the right to quit and get severance because her workplace is moving — something Case did for free (or at least, for no extra cash). She also benefits from a “tax equalization policy” making up for any difference between U.K. and U.S. taxes, and expanded tax-prep and financial-planning assistance.

You get the idea. If you want, you can also check out the additional agreements, for Steve McGill, CEO of Aon Risk Solutions, and Michael J. O’Connor, COO of Aon Risk Solutions.

If we were Chicago’s community leaders, we wouldn’t wring our hands about losing a big multinational outfit. We would embrace these agreements as evidence of just how affordable the city really is. And let’s face it, Aon grew to be a major global company there on the banks of Lake Michigan, so the Windy City can’t be too terribly constraining.

Then again, if Joe Mansueto should be reading this, we just want to be clear: We’re willing to move to London for a lot less. Give us a shout.

Image source: Sunrise in London via Shutterstock.com

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In the executive suite, needless to say, none of that seems to apply. Another Discovery Channel show, Gold Rush, may be more appropriate, to judge from the 8-K that Discovery filed yesterday with details of its incoming chief financial officer’s pay.

Discovery is hiring Andrew Warren away from the same post at Liz Claiborne (LIZ), where he’s been CFO since July 2007. The parting there seems amicable enough, since Warren doesn’t leave (or start at Discovery) until March. Once he starts, though, the cable network is pulling out all the stops. (Update: Warren is also getting big bucks from his former employer. See note below.)

He gets a nice salary, of course — $900,000 a year, matching what Apple CEO Tim Cook is pulling down as head of one of the biggest companies on earth — and a target bonus of the same amount. He’s also slated to get $1 million in stock options and another $1 million is restricted stock units. (Discovery’s 8-K doesn’t make clear how long it will take for those equity awards to vest, and it didn’t file Warren’s actual employment agreement yet, so we’ll have to wait to find out the terms.)

But Discovery is also making his relocation easy. Liz Claiborne, of course, is based in Manhattan, while Discovery is based 223 miles away in Silver Spring, Maryland, just outside of Washington, D.C. The company is providing unspecified relocation benefits, but “[i]n addition to the benefits under the relocation policy,” the company is also giving him as much as $30,000 this year and $20,000 next year “for travel expenses” (presumably to ease the commute until he moves to the area). Given that Delta just quoted us $892 for a round-trip, first-class, refundable, week-long flight (without a Saturday stay) from LaGuardia to Reagan National, that $50,000 should be good for a flight a week if Warren is reasonably prudent. In any event, we doubt we’ll see him on BoltBus, our preferred way to travel between NYC and DC.

Moreover, his stay in Washington will be no Man vs. Wild challenge: Warren will be traveling around the D.C. area in style, in a company-paid car — with a maximum of $1,500 a month — and “a suitable corporate apartment in the Washington, D.C. area” until as late as August 31, 2013. Just to put that in perspective, Yahoo’s monthly car-lease calculator suggests he could get a three-year lease on a BMW 650i convertible for a mere $1,300 or so a month. And five grand will get him the 2,420-square-foot, three-bedroom, two-and-a-half bath Penthouse 13 at the The Grand in nearby Bethesda, including Jacuzzi and granite counter-tops, plus a “grand piano room” and concierge among the building’s amenities.

Assuming Warren does move to D.C., his three-year employment agreement makes it tough for him not to make a bundle over the next few years. If he gets canned for anything but some pretty serious infractions, or if he leaves for the usual sorts of “good reasons” (like being demoted), Discovery is obliged to pay him his salary for the rest of the contract’s term — as much as three years, and at least one year.

But if Discovery doesn’t actually fire him, and just decides not to renew his contract, he gets the same benefits as if he had been fired. And if it does want to renew his contract, but Warren isn’t interested, Discovery has to pay him as well — half his base salary for 12 months (or $450,000 assuming he gets no raises in the meantime).

As far as we can tell, there are only a couple real catches. For one thing, Discovery seems to want to make sure that Warren actually moves down to the D.C. area. It has decreed that he won’t get a bonus in 2013 if he doesn’t. Meantime, if Warren is canned, leaves for good reason, or his contract isn’t renewed, Discovery can offset what it has to pay him with any income he gets from consulting or working elsewhere. All this, of course, is in the name of securing non-compete and similar commitments from Warren.

All told, it’s a pretty sweet deal for a position that isn’t even the top job at the company.

Update: If nothing else, it looks like Discovery is getting a savvy negotiator — Warren isn’t just getting big bucks and perks to join Discovery, he’s also getting big bucks on his way out Liz Claiborne’s door. (Of course, it might be that LIZ is forcing him out, but we’ll assume the best.)

According to an addendum to the earnings 8-K that Liz Claiborne filed just this morning, the company is accelerating the vesting on 492,500 stock options, 192,600 restricted stock units and 9,550 restricted shares, as long as Warren sticks around until March 16. Given LIZ’s stock price of a little over $8.50, we figure the options are worth some $1.6 million, and the restricted shares and RSUs another $1.7 million.

An especially nice touch: The 192,600 RSUs ($1.6 million worth at today’s price) were apparently granted as a “special retention award” on June 13 last year — which worked for all of, what, nine months?

Image source: photo of the Discovery Building during Shark Week via Wikipedia

Of course, as we first footnoted back in April when we discovered this, there’s another way to get an iPad: be a top-level executive who gets canned by your employer and have some lawyer negotiate it into your severance contract.

That’s exactly what we found at Auxilium Pharmaceuticals (AUXL) which filed this severance agreement with outgoing CEO Armando Anido on Friday afternoon at 4:24 pm. Since the company announced Dr. Anido’s sudden departure several weeks ago, we’re sure it was just a happy coincidence that the terms of his severance agreement were filed after the market closed for the long holiday weekend. If there was any lingering doubts that Anido was pushed out the door, the severance agreement should clear that up.

That’s because as severance agreements go, this one was pretty plush. Anido gets $1.9 million in severance — nearly four times his base salary of $555K — and full vesting of his options and RSUs that were scheduled to vest over the next 24 months, which judging from the proxy, appears to be worth millions more. But wait, as they say in those knife commericals. That’s not all. Anido also gets:

Mr. Anido may retain his Company purchase i-Phone, i-Pad and laptop computer so long as Mr. Anido cooperates with the Company to remove all Company-related information from such devices.

Now, given that Apple’s top of the line iPhone and iPad costs a grand total of $1,200, one would think that Anido could afford to buy his own devices, instead of asking a lawyer to negotiate them into his contract. Then again, given that we’ve seen at least 20 other executives asking for — and receiving — their company-issued iPads on the way out the door, maybe it’s not so surprising after all.

Image source: iPad photo via Shutterstock

Don’t forget to vote for the worst footnote of 2011!

Now, the proxy that Cisco filed earlier this week details one other way that the company plans to rein in costs. By recalling Bangalore-based chief globalization officer Wim Elfrink — his bio (PDF) is here — which the company announced back in May, Cisco is likely to save over $3 million a year. Of course, in order to save that money, first they have to spend. The specific details were in footnote #11 in the proxy.

The part that really popped out at us — even at a company the size of Cisco — was the cost of housing in India: a whopping $631,797. While we’re admittedly not very knowledgeable about the real estate market in Bangalore, the number seems excessive by any reasonable measure, even if, as the proxy notes, it also included “maintenance and domestic household assistance.”  Cisco  also paid nearly $200K last year for housing assistance and utilities in the U.S., which we’ll assume means paying the mortgage on Elfrink’s home in Silicon Valley, though the proxy isn’t very specific. And the company will spend another $200K to move Elfrink back to the U.S. There was also another $700K or so that the proxy helpfully notes was used for:

personal benefits included in the amounts shown for fiscal 2011 consist of the following: provision of security arrangements, allowances for automobiles, child education, home leave travel, relocation, and fees for tax services; and goods and services differential.

All told, Elfrink’s other compensation — the various perks — added up to $3.8 million, the bulk of which, or $2.1 million, was for “tax equalization benefits” — otherwise known as a gross-up. That gross-up was more than three times higher than it was just two years earlier.

Now here’s where the cost-savings comes in. The proxy notes that in fiscal 2012, Elfrink’s expenses will be “substantially reduced and capped at approximately $508,000.” Total savings? Roughly 85%.

Granted, given Cisco’s size, the numbers may not move the needle all that much, if at all. But savings is still savings. Still, we doubt that those 6,500 people who found out that they were losing their jobs as part of the cost-savings will take much comfort in that.

Image source: Cisco Systems

Take the proxy that Coach (COH) filed last week, which included this statement:

“We believe long-term growth can continue through a combination of expanded distribution, a focus on innovation to support productivity and disciplined expense control.”

Given some of the fears that seem to be surfacing over China and the voracious appetite for American luxury brands, we can certainly understand how these words are probably comforting to investors.

Too bad the proxy actually tells a somewhat different tale. Indeed, we found ourselves wondering about the “disciplined expense control” phrase, which apparently means expenses other than executive compensation.

Consider the compensation paid to Reed Krakoff, Coach’s President, Executive Creative Director. In FY 2011, his total compensation added up to more than $21.18 million. That included more than $2.62 million in base salary, a bonus of $2.19 million, $600,000 in stock awards, more than $6.16 million in options, and more than $8.98 million as non-equity incentive compensation. And a tiny footnote adds that Krakoff’s base salary is about to rise to more than $2.85 million for FY 2012.

Another interesting nugget concerns the company-employed driver who has chauffeured Krakoff around – for business as well as personal travel – for the past few years (although Krakoff did pay taxes for his personal use of the driver’s time). Krakoff enjoyed the perk through the end of FY 2011, but the filing explains:

“Effective July 1, 2011, the HR Committee authorized the elimination of this position, and the Company no longer employs a driver for Mr. Krakoff. In exchange, the HR Committee authorized a one-time salary increase of $94,000 and the standard monthly cash transportation allowance for Mr. Krakoff.”

Whatever prompted Coach to make the change, it doesn’t appear to be a cost-cutting measure (except for the cost of the benefits that Coach no longer pays for the driver). In the fine print explaining the $627,499 in ”Other Compensation” that Krakoff got for FY 2011, Coach discloses that $104,447 of it was for his “Transportation Benefit.” Since Krakoff is getting the $94,000 raise, and depending on how much the company shells out each month for the standard executive transportation allowance, it’s possible that he will end up with more money, or it may be a wash. (The lion’s share of the “Other” comp – $492,400 – was for Coach’s contribution to Krakoff’s Non-Qualified Defined Contribution Plan.) This isn’t the first time that we’ve footnoted Krakoff. Indeed, he’s something of a frequent footnoted flyer (see here and here, for example).

Coach’s Chairman and CEO, Lew Frankfort, also fared well in FY 2011. His total compensation added up to more than $12.39 million. Of course, his total comp number is actually $1.35 million lower than his total comp in FY 2010; however, the $3 million decline in stock awards is partially offset by an increase of more than $1.44 million that he got in the form of cash – mainly due to a $238,250 raise and an increase of more than $1.2 million in non-equity incentive compensation.

Granted, Coach has been doing well despite the global economy’s challenges over the past few years. It is expanding its international presence, having celebrated just last week the opening of its “first European flagship store” in London (brand spokesperson Gwyneth Paltrow and other celebrities turned out for the occasion).

Coach has identified increased global distribution (especially in North America and China) and improved store sales productivity as its key strategies for future growth. If it can weather the ongoing economic challenges and coax nervous consumers to part with their cash, shareholders may not care how much they’re paying their top executives. But it seems that the executives themselves have little reason to be nervous; for them, the money’s in the bag.

Image source: SarahSphar via flickr

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Risk avoidance is critical in the current market environment. Over on FootnotedPro, we shine a spotlight on potential problems well in advance of the market. For more information or to inquire about a trial subscription, contact Todd Serpico.

]]> http://www.footnoted.com/perk-city/the-luxury-comp-behind-the-luxury-bag-at-coach/feed/ 1 http://www.footnoted.com/perk-city/wanting-a-half-full-glass-from-lockheed-martin/ http://www.footnoted.com/perk-city/wanting-a-half-full-glass-from-lockheed-martin/#comments Fri, 23 Sep 2011 14:50:40 +0000 Sonya Hubbard http://www.footnoted.com/?p=6392

Yesterday was a big day for Lockheed Martin (LMT). Besides news that it had established the Executive Office of the Chairman (to enhance responsiveness), shareholders learned that the board approved a 4th quarter dividend of $1.00 per share and a stock repurchase of up to $2.5 billion. Also announced:  an infrastructure upgrade so that the Defense Department can communicate better with other agencies and coalition partners.

But the company waited until 5:26 pm last night to trot out this one-paragraph 8-K. Here’s a snip from yesterday’s filing:

“On September 22, 2011, the Board of Directors of Lockheed Martin Corporation,… decided to discontinue the practice of providing elected officers with tax assistance (i.e., tax gross-ups), effective January 1, 2012, for personal use of corporate aircraft and taxable business association dues. The Corporation plans to continue to provide tax assistance to elected officers for security, relocation assistance, and travel expenses for family members accompanying officers on certain business travel, because the Board believes that these actions have a business purpose and benefit to the Corporation.”

So gross-ups for personal jet travel are out, presumably because they don’t really “have a business purpose and benefit to the Corporation.” But gross-ups to cover the cost of a board member’s wife flying on the corporate jet are A-OK? We’ve long taken the position that gross-ups are gross, so it’s great to see yet another company eliminating them, even if it’s just a partial elimination. Still, this kind of logic made us wonder how the company justified paying tax gross-ups in the first place.

The answers were in the March 11, 2011 proxy:  For “security reasons,” the board required its Chairman/CEO, Robert Stevens, and its President/Chief Operating Office, Christopher Kubasik, to use the corporate plane for personal travel. Another reference (which applies to the tax gross-ups paid on all executive perks, not just personal use of the corporate planes) stated:

“The items for which we provide tax assistance serve a business purpose and the associated tax liability imposed on the executive would not have been incurred had they not been required for business reasons. In 2010, the aggregate amount of tax assistance provided to all five NEOs was approximately $650,000.”

So there was a business purpose, but now there’s not anymore?

Digging deeper, we found that the only amount disclosed for this perk in FY 2010 was for Kubasik, whose personal use of the plane was valued at $121,026 – a number that seemed large enough to us until other numbers eclipsed it (e.g., in the same year, Lockheed Martin spent nearly $1.3 million on security for Stevens and almost $189,000 for Kubasik’s; it also paid more than $412,000 in relocation assistance for Executive Vice President Marillyn Hewson).

In the footnoted archives, we found a post from December, 2006 about Lockheed Martin’s decision to stop paying for perks like country club initiation and membership fees, Town Cars for local transportation, tickets to sporting and entertainment events, and tax preparation and financial planning services for top executives. At the time, the company gave the executives raises to offset the loss of the perks. And yet, this year’s proxy discloses that some of those perks are back: “…the Corporation made available event tickets and a company-provided car and driver for personal commuting to some of the NEOs, but required the NEOs to reimburse the Corporation for the incremental cost of such items.”

We try to take a “glass half-full” attitude toward companies when they take steps – even small ones – that demonstrate an awareness that a company’s bank account is not the executives’ personal piggy bank. Yet, all too often, there’s a lot of room for improvement. Sigh.

Image source: jenny downing via flickr

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Risk avoidance is critical in the current market environment. Over on FootnotedPro, we shine a spotlight on potential problems well in advance of the market. For more information or to inquire about a trial subscription, contact Todd Serpico.

Devin Wenig, previously head of Thomson Reuters Markets, is scheduled to start as president of eBay Marketplaces on October 1, a job held by eBay CEO John Donahoe since September, according to the 8-K and press release that eBay issued on Tuesday. It’s a big job — the Marketplaces segment made up 60% of the company’s net revenues from external customers in the quarter ended June 30 — and so as you might imagine, it comes with big pay all around.

The salary, actually, isn’t so huge compared to other senior executives we’ve seen: $750,000 a year. His target bonus would add another $750,000 (or more if various performance measures exceed target). The real money is in equity: $2.4 million in restricted stock, half of it soon after he starts, the other half six months later, and starting to vest in a couple years if he stays employed. He gets another $7.8 million in restricted stock units, vesting 25% on each of the next four anniversaries of his employment. Then yet another slug of $1.8 million in restricted stock units will vest based on company performance through 2012.

That’s a lot of cash and stock, but what really caught our eye — and the eye of the helpful folks over at 8kexecutive – was the housing assistance laid out in his offer letter. He’ll get moving costs paid, of course, plus $10,000 a month for temporary living expenses (if you can call that living) for an unspecified period of time, and “the cost of transportation, including air travel (business class) and reasonable related travel expenses for you or your family every two weeks” for as long as a year. eBay will even pay the taxes on that transportation assistance “to the extent applicable.”

And then eBay has this to offer:

“You will also be eligible to receive a home purchase payment of $1,000,000 (less deductions and applicable taxes) to assist you with expenses related to your move to the San Jose area, including the purchase of a home. This housing purchase payment will be payable as soon as administratively possible following your notice to the Company that you are prepared to purchase a home in the Bay Area, but not later than the first pay period of March 2012.”

To our eye that sounds like Wenig may have to decide to buy a house by March 2012 to be eligible for the $1 million — but also that he could decide not to buy, and continue to collect the temporary housing assistance for, well, it’s not clear how long.

Wenig does have to pay eBay back if he quits or is fired for cause within a year, and he has to give some of it back if he leaves between a year and three years (at 1/36th of the total for every month short of three years that he stays). It’s also not clear how far that $1 million will go. Given that Wenig’s current home — or maybe just his vacation house — seems to be a 3,466-square-foot, four-bedroom, three-bath place a few blocks from Long Island Sound, he appears to have pricey tastes.

Still, it seems like a sweet deal to us, even in light of the other examples of housing allowances we’ve footnoted over the last year or so. After all, eBay runs the world’s largest online marketplace — with a little clever searching, maybe they could find him something attractive there.

Image source: eBay corporate website

Sometimes, we run into something really unusual in the filings. Periodically, filings intersect with current events far from the usual realm of corporate and financial headlines. And then there those rare occasions that we get both in the same document. That’s what we found tacked on to the end of the 10-Q that Medicis Pharmaceutical (MRX) filed at a few minutes before 5 p.m. on Tuesday.

Medicis, of course, has been under a pretty bright spotlight since mid-July, when police (and local journalists) were drawn to Chief Executive Jonah Shacknai’s Southern California mansion in response to two unusual deaths. First, on July 11, his six-year-old son, Max, was hospitalized after falling down a flight of stairs; he died four days later. On July 13, Rebecca Zahau, Shacknai’s girlfriend, was found hanged from a balcony on the property, naked and with her hands and feet bound. (Other reports refer to her as Rebecca Nalepa.) So far, there has been little word on the police investigation of Zahau’s death, though Radar Online said Tuesday that the inquiry could wrap up within “several weeks” and that the child’s death is being viewed as accidental.

All of this came to mind again as we saw Shacknai’s new employment agreement attached to the company’s 10-Q that was filed earlier this week. It runs into 2016 and guarantees him a salary of $1.1 million a year — essentially what he has been getting — with an unspecified annual bonus and stock grants, as well as eight weeks of vacation.

What really caught our attention were some extraordinarily flexible working arrangements written into the contract. It says he’s expected to work “on average a minimum of four (4) days per week,” either at the company’s Scottsdale, Arizona, headquarters, or, alternatively,

“the Executive shall be available during the business week to meet with Company personnel, attend telephonic meetings, and participate in other corporate matters from his home during the normal business week and/or at such other times as the Executive may be available…”

Part-time chief executives are unusual enough, as are provisions explicitly codifying the right to work from home (though we imagine, informally, CEOs have more flexibility there than the rank-and-file). More unusual is that the contract explicitly acknowledges that Shacknai has child-care obligations, and may not be available during the work-week as a result:

“It is expressly understood and agreed that the Executive may not be available for corporate matters during such times that he is providing care for his children.”

The contract provision goes on to say that “participation … in philanthropic, community education and/or charitable activities during the normal business week” will also be considered “in furtherance of the Executive’s duties of his employment…”

Our first thought was that this showed unusual, and unusually compassionate, flexibility in the face of what is presumably an extremely difficult time for Shacknai; none of the flexible working conditions were mentioned in an 8-K summarizing the agreement filed on June 30.

But in fact the agreement appears to have preceded both incidents at Shacknai’s house: It’s dated June 24, suggesting that the company was comfortable with this extreme form of executive flextime even in the ordinary course of business.

And it turns out that some of the flextime provisions have been in his contract for a while, in one form or another. For example, while his original contract (filed with the Medicis 10-K in August 1996), contemplated that he would “devote substantially all of his time, energy and skill during regular business hours to the performance of the duties of his employment,” an amendment on April 1, 1999 (filed with a 10-Q on May 15, 2001), specified that only 2-1/2 days of the workweek would have to be in the office. The amendment continues:

“The Executive shall be available to meet with Company personnel, attend telephonic meetings and participate in other corporate matters, as appropriate, from his home during the remaining periods of the normal business week, provided that the Executive’s children are not in his care at such time. It is expressly understood and agreed that the Executive shall not be available for corporate matters when his children are in his care. The Executive has elected to apply his vacation time to facilitation of this amended schedule.”

The provision was further modified to something much like the current form in December 2005 (and filed with an 8-K on January 3, 2006), with a four-day week and similar child-care and philanthropic-endeavor language.

If all the flexible working conditions suggest that Shacknai isn’t giving Medicis plenty of attention, consider this Wall Street Journal report on the quarterly earnings webcast Medicis held on Monday: Shacknai told investors he’s been in daily touch with work even during the turmoil of the last few weeks, and will return to his normal schedule soon.

And there’s apparently a lot of business to mind. Even amid news of the deaths at Shacknai’s house, there have also been M&A rumors, mostly stemming from a WSJ article on Monday reporting that Valeant Pharmaceuticals (VRX) had approached Medicis about acquiring it.

Under Shacknai’s contract, that could trigger a sizable payout if he’s eased out after a sale: 3x salary and bonus, lifetime health benefits, $225,000 over three years for administrative support and services, and more.

Plus, on the same day that Shacknai signed his new contract, the company established a new executive pension program, effective retroactively back to June 1. It’s not yet clear exactly how big Shacknai’s pension will be under the plan, but he’s eligible for an annual payout of up to 50% of his average earnings each year for 20 years, and the 10-Q shows the company has already accrued a $33.8-million liability for an unspecified number of participants in the plan.

That said, Shacknai couldn’t claim the full pension immediately: He and the others earn a sixth of it each year through 2016 — or all at once if the company is acquired.

Image source: Coronado Common Sense blog

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