Jon Corzine’s $1.5-million escape clause…

March 7, 2011

Public-company filings can be dry stuff, but every once in a while, one offers careful readers vivid insight into the aspirations and personalities of some of the business world’s most prominent people. So it was with the employment agreement filed on Friday by MF Global (MF) for Jon Corzine, New Jersey’s former governor and U.S. Senator and one-time co-head of Goldman Sachs, who seems to still harbor hopes of returning to a prominent role in public life.

Corzine, of course, took the reins at MF Global not long after his stinging defeat for re-election to the Garden State’s gubernatorial mansion, and he has drawn some attention to his bold plan of turning the specialty derivatives house into a more general-purpose brokerage (and for taking steps in that direction).

We footnoted Corzine’s original employment contract a little shy of a year ago — including a slew of nice perks and a curious provision letting him split his time between running MF Global and making money for private-equity shop J.C. Flowers & Co., which is also a big MF Global shareholder. His new contract keeps the Flowers provision and was filed with an 8-K late on Friday. It has gotten a little press as well, including this Bloomberg News article that summarizes the basics of the pay pact. Chiefly, others have noted the $1.5 million retention bonus, payable in spring 2014; it also has an interesting set of staggered stock-option awards he’ll receive over the term of the three-year deal, some of which depend on MF’s share price rising by at least $1 or $2.50 a share from a figure set set this spring.

But as we flipped through his contract over the weekend (yes, we lead exciting lives), a couple other things jumped out at us.

First, that retention bonus seems to simply replace a $1.5 million sign-on bonus he got in last spring’s one-year deal. Should Corzine stick around through next spring, we can’t help but wonder whether yet a third $1.5 million bonus of some sort will be conjured up. Granted, the new retention payment is more or less contingent on his remaining on the job until 2014; but cobble together enough of these one-time payments, and it starts to look a lot like ordinary pay — an entitlement rather than something special to attract, retain or reward.

More interesting still, Corzine — or someone on his behalf — is clearly looking out for his future career goals, beyond the big ambitions he has at MF Global. In describing when that retention bonus would, and wouldn’t, be paid, the contract says he’ll get it on March 31, 2014, or when he leaves the job, provided he doesn’t quit without a good reason or get fired for cause.

That’s all standard enough. But then there’s this additional exception, that would allow him to receive at least partial payment even if he quits without “good reason.” Specifically, if

“such Separation from Service is due to your termination of your employment in order to accept employment at any U.S. Federal, state or local government, any agency or instrumentality of any such government, or a widely recognized non-governmental or public policy organization, in which case you will be paid a pro rata amount of the Retention Bonus in accordance with the same payment timing described above and in an amount equal to the Retention Bonus multiplied by a fraction, the numerator of which is the number of completed days of employment with MF Global since the Commencement Date and the denominator of which is 1,095.”

In other words, if he quits to take a government job, he still gets a part of that retention bonus, or practically all of it if he quits close to March 31, 2014. The same holds true if he leaves to take a “widely recognized non-governmental or public policy organization,” which would seem to encompass anything from the World Bank presidency to a fellowship at the Brookings Institution or a gig at Princeton University, where he’s already been a visiting professor.

We can’t help but notice that the term of the current governor — Chris Christie, the Republican who beat Corzine last time around — is up in early 2014. Moreover, the seat of incumbent U.S. Senator Frank Lautenberg, a Democrat who turned 87 this winter, is up for re-election that year as well. Not that there’s necessarily any connection, of course. What we really love about the escape clause is that it’s so broadly written, it would seem to apply even if he left for some less august job, such as mayor of tiny Barnegat Light, New Jersey, (pop. 835) or perhaps even part-time animal-control officer in Montgomery County, New Jersey.

It reminds us more than a little of the escape clause that CSX Corp. (CSX) added to the contract of former CEO John W. Snow in 2001, just a few months before President George W. Bush nominated him to be Treasury secretary. That unusual clause went unnoticed until after the fact and promised him severance payments of some $3.3 million, plus $5 million in lieu of a life-insurance policy, if he quit to “fulfill an appointment to public office.” (We can’t find a link, but the article one of us wrote disclosing the change ran in The Wall Street Journal on December 10, 2002.)

Only time will tell whether Corzine takes advantage of his own escape hatch to return to public life, or if he keeps his shoulder to the wheel carrying out his grand designs for MF Global (with or without additional one-time, $1.5-million bonuses). We just hope he’ll give shareholders plenty of good reasons to care which it is.

Image source: Corzine campaign website

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