An expensive babysitter for Applied Materials
For those that missed this tweet on Monday, footnoted quietly celebrated its 10th anniversary on Sunday. For those who want to see the proof, this is the post that started it all. Over the next few weeks we expect to roll out several new features that readers have been asking for. We’ll talk more about that soon enough. For now, we’re heading down memory lane and two posts where outgoing CEOs were paid large amounts of money to essentially babysit their replacements. To be sure, these aren’t the only companies where this has happened over the past 10 years. But this post about ConAgra and this one about the company formerly known as Bowater stood out in our minds.
We thought about this when we read the 8-K that Applied Materials filed last week. Like most press releases, this one just focused on the changing of the guard: longtime CEO Michael Splinter was stepping down, but would continue as executive chairman. Replacing Splinter is Gary Dickerson, who had been CEO of Varian Semiconductor until Applied Material bought the company in 2011. Last year, Dickerson was named president of the company, a title he’ll continue to have once the transition becomes official on Sept. 1.
Several news outlets picked up on the press release, which was put out a few hours after Applied Matierals released earnings. As a result, most of the news reports tied the two events together. See this Bloomberg story, for example.
But for us, the thing that jumped out was what we like to refer to as the expensive babysitter angle, which was only in the 8-K and not in the press release. As the 8-K notes, Splinter may be stepping down as CEO and presumably be working a lot fewer hours as executive chairman. But his salary will be the same $980K a year as it was when he was CEO. The filing notes that Splinter will collect the $980K salary through March 2015. Needless to say, the filing doesn’t describe this as a babysitting arrangement. But given the long timeframe, it’s hard to see it as anything but.
Meanwhile Dickerson, whose base salary had been $750K as president, is seeing his salary increase to $980K. He’ll also get 1 million options, which will vest over the next four years.
Because the company didn’t opt to include either Dickerson’s or Splinter’s employment agreements, it’s hard to get a real handle on just how much babysitting Splinter will be doing. Presumably, those agreements will surface when the company files its latest 10-Q over the next week or so.