A quixotic approach to compensation?

October 5, 2007

don-quixote.jpgQuixote Corporation (QUIX) seems like an odd name for a company, since Don Quixote would hardly have been much of a businessman. But names don’t really matter. As Cerberus Capital Management has proven, you can inadvertently name yourself for the 3-headed dog who guards the entrance to the underworld and still make truckloads of money.

Quixote’s proxy statement (filed Wednesday) caught my eye — not just because of the name, but because the Compensation Discussion and Analysis (CD&A) doesn’t read like most others. It’s written in Plain English, a feat that’s technically required for CD&As but (as SEC Chairman Cox has peevishly noted) is rarely achieved.

Maybe it’s just that I’m not used to a CD&A I can actually understand, but Quixote seems unusually forthright about its subjective approach to executive compensation. The compensation committee, we’re told, “does not utilize objective guidelines or formulae, performance targets or short-term changes in our stock price.” So what the heck does it do? Well, like any sensible comp committee, it looks at the performance of each officer and the company, checks out what competitors pay and works with a consultant, but in the final count it “relies upon its collective judgment as applied to the challenges confronting the Company.”

The CD&A also notes that ‘”he recommendations of our CEO play a significant role in the compensation-setting process.” Not exactly a shocker to some of us, but I give these guys credit for coming right out and saying it. They’re shyer about perks, though; you have to peer at the footnotes to the Summary Comp Table to see that all three named officers got a company car, grossed up for taxes, plus more tax gross-ups ($70K in the case of Chairman/CEO/President Leslie Jezuit) for restricted stock awards that went into a retirement plan.

Maybe you like Quixote’s compensation philosophy, maybe you don’t. But at least you can read about it without getting a migraine.

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