A new contract at Saks…

saks.jpgSaks Incorporated (SKS), parent company of Saks Fifth Avenue and Off Fifth, finally signed a new employment agreement with CEO Stephen Sadove. The new agreement, filed yesterday, updates the 2002 agreement Sadove had with the company while vice president. Even though he began serving as CEO in 2006, the company kept the 2002 agreement in place, perhaps because it had no expiration date. (The new agreement is here, and the old one is here.)

The new contract raises Sadove’s salary from $980K to $1.06 million. It also hikes his bonus eligibility. The old bonus was 70 percent of base salary with the possibility of 140 percent for “breakthrough results.” Now, for “threshold level” achievements Sadove gets a bonus of 75 percent of base salary. If he hits earnings targets he gets 150 percent of base salary and gets 215 percent of his salary for exceeding expectations.

There are also changes to the benefits and tax sections of the agreement. The differences between the two contracts is a good primer on how executive expectations have changed since the bygone days of 2002.

Perks in the old agreement consisted of three sentences essentially granting travel reimbursements, four weeks of vacation and financial planning services. The new agreement grants the same benefits as the 2002 agreement but adds reimbursement for annual physicals at the Mayo Clinic and an extra week of vacation.

There are also now several paragraphs about gross-up payments if Sadove is subject to excise taxes, which was not as common of a perk in 2002, or at least not often disclosed. Sadove can notify the company if he thinks the IRS is demanding a tax payment that Saks should pay for him. If the company refuses to provide the gross-up payment, Sadove can challenge the company’s claim, and Saks will foot the bill for Sadove’s appeal.

Granted, Sadove’s expanded responsibilities as chairman and CEO warrant him finally getting a higher salary, as opposed to working under the old contract. Still, the stock hasn’t moved much during Sadove’s tenure, so investors may beginning to wonder what they’re getting out of the deal.