Heartland Express gets a gold star…
Anyone who hangs out around kids will eventually hear some whiny version of, “I should get (fill in the blank) because everyone else has it.”
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!
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Posted in Tags: CEOs, perks, proxy |
 6 Comments » |
April 9th, 2010 at 2:39 pm
Wow, what a novel, imaginative idea. Have the CEO’s compensation be dependant on the company he is in charge of. No incentive because there is that vast amount of companies just waiting to poach a CEO, no incentive to attract the best talent, just a company rewarding the workers as fair as it can. Perhaps we can see who is on the Compensation Committee, they’re great!
April 10th, 2010 at 11:19 am
And this policy, by the way, comes from Russ Gerdin himself. Look up “salt of the earth” in the dictionary, and you will find a picture of Russ. He is an absolute–and, sadly, far too rare–treasure. I doubt there are many CEOs like him.
April 11th, 2010 at 12:21 pm
bravo to HTLD! Indeed, far too rare.
April 13th, 2010 at 6:22 am
While this isn’t bad news, the fact he owns 42% of the stock makes other compensation fairly meaningless. If the stock climbs say 7% this year then he makes $40m on paper. Poor chap. (Of course he would be down $40m if it fell too…)
Many LTIPs try very hard to give execs skin in the game and make them “act like owners” – boards desperately WANT execs incentives to be in-line with shareholders incentives.
That challenge is notoriously hard to achieve.
The problem is that simply giving out 42% of the stock to a new CEO say, would not go down very well with the existing holders.
Since that is the status quo here – there is no need to pay up to achieve what is already the case.
April 14th, 2010 at 5:42 pm
Two other things impress me about HTLD:
1. Between 2007 and 2009 it repurchased 7.5 million shares at an average price of $13.49 a share. Its average trading price during this time was $16.12 a share, saving shareholders approximately $20 million on those repurchases. Most companies pay average market prices during a given year or higher. Think of this as a 20% return on investment. ($20M/$101M – cost of buying shares)
2. It paid a special dividend of $2 a share in 2007. Not many companies do this.
August 3rd, 2010 at 3:11 pm
Heartland Express isn’t all it says it is , but if you like doing stuff for free low miles and sitting at truck stops for 2 to 3 days at a time then good luck.