And now: the game changer bonus

July 30, 2015

Quick: what do you think about when you hear the words “game changer”? We doubt that it’s a hefty bonus for tobacco industry executives.

And yet, judging by this 8-K filed by Reynolds American Inc. yesterday, that’s exactly what it is. Needless to say it was buried in a lot of legalese (read: boring language). But the words “game changer” were actually used to describe the bonus, which is a first when it comes to SEC filings.

Based on yesterday’s filing, the new bonus was designed as a “one-time performance-based cash awards to all employees of RAI and its subsidiaries designed to maintain focus on the successful integration of the recently completed acquisition of Lorillard, Inc.” The company closed its $27 billion acquisition of Lorillard last month.

Given that RAI and its subsidiaries have about 5,300 employees (as of the most recent 10-K), this new bonus may very well be a game-changer for those employees. Of course, the filing doesn’t really provide enough details to figure out how much those folks will receive, or how much this will cost the company.

That’s not the case, however, for four top executives: CFO Andrew Gilchrist, former CFO Thomas Adams, Chief Commercial Officer Debra Crew and General Counsel Martin Holton, who will each receive 65% of their base salary under this new “game changer” bonus. Based on the most recent proxy, those salaries range from around $550K up to $725K.

Over the years of reading filings, we’ve come across a lot of crazy names to describe various bonuses. Up until yesterday’s filing, our favorite had been the “synergy bonus” which like the game-changer, is often tied to M&A activity.

Given RAI’s stock performance in the 6 weeks since the deal has closed, this deal may very well turn into a game-changer. Time will tell whether the name fits the bonus.

Posted in: Compensation, M&A

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Companies Mentioned: Reynolds American Inc,
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