Comments on: Moving up by moving on down the road… http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/ Michelle Leder's guide to what's hiding in SEC filings Wed, 08 Sep 2010 20:38:26 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Floyd Upperman http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/comment-page-1/#comment-3528 Floyd Upperman Wed, 10 Oct 2007 15:21:37 +0000 http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/#comment-3528 I agree............ I agree…………

]]> By: Wendy Fried http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/comment-page-1/#comment-3478 Wendy Fried Sun, 30 Sep 2007 19:33:01 +0000 http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/#comment-3478 Thanks for the comments. This subject does have nuances I couldn’t cover in a 350-word post. I’ll try to flesh out my thinking a little more. First, I live in NYC and believe me I understand the traffic issues! But these boilerplate clauses are used in all sorts of geographic locations; e.g., a quick check of last month’s filings showed 30-mile triggers operating in western Pennsylvania and northern Indiana. (Perhaps these are traffic-plagued areas, but I feel entitled to assume not until it's proven otherwise.) Second, even where the mileage change is meaningful, I’d take issue with the constructive termination treatment, because a move is different from something like a pay cut. Presumably a move happens for a good business reason, yet the executive has basically been given a put on his job that’s exercisable if he’s asked to relocate. Investors are constantly told that compensation is all about retaining people integral to the company’s success (which is how these clauses get into contracts in the first place), but many firms are giving away in advance their bargaining power in a relocation (as David said, there are cheaper ways to address the problem), and they’ve created an incentive - a very attractive one in some cases - for the exec to leave rather than stay. Surely there’s a better way to deal with this issue. Also, with respect to rank and file employees, I’m guessing they’re more often given incentives to move than incentives not to move. If they're getting constructive termination deals in L.A., I'd be interested to know that. Thanks for the comments. This subject does have nuances I couldn’t cover in a 350-word post. I’ll try to flesh out my thinking a little more. First, I live in NYC and believe me I understand the traffic issues! But these boilerplate clauses are used in all sorts of geographic locations; e.g., a quick check of last month’s filings showed 30-mile triggers operating in western Pennsylvania and northern Indiana. (Perhaps these are traffic-plagued areas, but I feel entitled to assume not until it’s proven otherwise.)

Second, even where the mileage change is meaningful, I’d take issue with the constructive termination treatment, because a move is different from something like a pay cut. Presumably a move happens for a good business reason, yet the executive has basically been given a put on his job that’s exercisable if he’s asked to relocate. Investors are constantly told that compensation is all about retaining people integral to the company’s success (which is how these clauses get into contracts in the first place), but many firms are giving away in advance their bargaining power in a relocation (as David said, there are cheaper ways to address the problem), and they’ve created an incentive – a very attractive one in some cases – for the exec to leave rather than stay. Surely there’s a better way to deal with this issue.

Also, with respect to rank and file employees, I’m guessing they’re more often given incentives to move than incentives not to move. If they’re getting constructive termination deals in L.A., I’d be interested to know that.

]]> By: Jennifer http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/comment-page-1/#comment-3474 Jennifer Sat, 29 Sep 2007 20:45:30 +0000 http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/#comment-3474 yeah, I was thinking she must not live in NY or LA. 30 miles takes an hour and a half to two hours driving here in LA. LA and Orange County are on two different planets entirely. Even run of the mill employees get lots of concessions for a 30 mile move. They already drive an hour each way, generally. That's two hours per day. They'd have to sell their house or spend three to four MORE hours on the freeway daily than they do already. That's constructive termination in my book. yeah, I was thinking she must not live in NY or LA. 30 miles takes an hour and a half to two hours driving here in LA. LA and Orange County are on two different planets entirely. Even run of the mill employees get lots of concessions for a 30 mile move. They already drive an hour each way, generally. That’s two hours per day. They’d have to sell their house or spend three to four MORE hours on the freeway daily than they do already. That’s constructive termination in my book.

]]> By: David Harper http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/comment-page-1/#comment-3473 David Harper Sat, 29 Sep 2007 17:03:11 +0000 http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/#comment-3473 Dan, good point, easy to forget if you don't have much of a commute. Two things strike me about this routine clause: (1) it appears asymmetric with rank-and-file; employees of IndyMac who drive far to work likely aren't reimbursed. I mean of course employees won't have same perqs, but (I am rusty, I may be wrong) employees get no economic consideration on the same factor. (2) If a provision like above is justified, and it may be, then it explains why investors don't really care about 'excessive' CEO/executive perqs. In the above case, it would be cheaper to buy a helicopter, if needed. (It might almost be cheaper to invent a teleporting device than trigger the constructive termination). The implied premium on the executive's time, and the value of retaining him/her far exceeds the cost of any/all extravagant perqs. Dan, good point, easy to forget if you don’t have much of a commute. Two things strike me about this routine clause: (1) it appears asymmetric with rank-and-file; employees of IndyMac who drive far to work likely aren’t reimbursed. I mean of course employees won’t have same perqs, but (I am rusty, I may be wrong) employees get no economic consideration on the same factor. (2) If a provision like above is justified, and it may be, then it explains why investors don’t really care about ‘excessive’ CEO/executive perqs. In the above case, it would be cheaper to buy a helicopter, if needed. (It might almost be cheaper to invent a teleporting device than trigger the constructive termination). The implied premium on the executive’s time, and the value of retaining him/her far exceeds the cost of any/all extravagant perqs.

]]> By: Dan Schwartz http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/comment-page-1/#comment-3472 Dan Schwartz Sat, 29 Sep 2007 00:53:16 +0000 http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/#comment-3472 The "50 mile" radius provision is routine and quite common among senior executives and certainly not just CEOs at least in the Northeast. While 50 miles may not seem much in some parts of the county, moving your office from Stamford, CT to say, Short Hills NJ makes it entirely a new job. Plus 50 miles here may equial 2 hours of commuting time (seriously). If companies are willing to pay (overpay?) to attract talent, its fair for the executives to negotiate to get the best deal they can. The “50 mile” radius provision is routine and quite common among senior executives and certainly not just CEOs at least in the Northeast. While 50 miles may not seem much in some parts of the county, moving your office from Stamford, CT to say, Short Hills NJ makes it entirely a new job. Plus 50 miles here may equial 2 hours of commuting time (seriously).

If companies are willing to pay (overpay?) to attract talent, its fair for the executives to negotiate to get the best deal they can.

]]> By: Brendan Connor http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/comment-page-1/#comment-3471 Brendan Connor Fri, 28 Sep 2007 21:06:27 +0000 http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/#comment-3471 Well, at least Dick isn't going anywhere soon, not if he wants that equity to be worth a dime. Well, at least Dick isn’t going anywhere soon, not if he wants that equity to be worth a dime.

]]> By: David Harper http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/comment-page-1/#comment-3470 David Harper Fri, 28 Sep 2007 19:52:35 +0000 http://www.footnoted.com/my-big-fat-deal/moving-up-by-moving-on-down-the-road/#comment-3470 Interesting, I didn't know that, so moving the office 40 miles can be legally equivalent to a 'constructive termination?" Wow. What is a "highway mile?" Is that like a nautical mile but on land; a.k.a., a mile. Could 35 geographical miles be more than 35 highway miles? Oh wait, could this be: the office relocates 15 *straight* miles but the exec would have to take a roundabout freeway such that it equals 30+ "highway" miles...if that's true, the company should counter with "the lesser of [walking distance], [subway minutes], [highway miles], and [jetpack flying time]" Interesting, I didn’t know that, so moving the office 40 miles can be legally equivalent to a ‘constructive termination?” Wow.

What is a “highway mile?” Is that like a nautical mile but on land; a.k.a., a mile. Could 35 geographical miles be more than 35 highway miles? Oh wait, could this be: the office relocates 15 *straight* miles but the exec would have to take a roundabout freeway such that it equals 30+ “highway” miles…if that’s true, the company should counter with “the lesser of [walking distance], [subway minutes], [highway miles], and [jetpack flying time]“

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