Change is expensive…

November 30, 2006

coins.jpegAs I footnoted on Tuesday, outgoing H.B. Fuller (FUL) Chairman and CEO Al Stroucken’s decision to take the top job at Owens Illinois (OI) is going to cost Fuller shareholders plenty. But they’re not the only ones paying. Late Tuesday, Owens Illinois filed an amended 8-K that not only included Stroucken’s deal, but also included that of outgoing Owens CEO Steven McCracken.

Let’s first take a look at McCracken*, since he’s only getting one helping. According to his agreement, he’ll collect a minimum of $8.6 million, plus get full vesting of stock options, restricted stock and restricted stock units. There’s also the ubiquitous tax gross-up. And 30 hours a year on the corporate jet for at least the next two years, and life insurance for the next five years, and access to administrative staff. Not a bad deal, considering that McCracken was only at the helm for 2 1/2 years and the stock price barely budged during that tenure.

Moving on to Stroucken, who’s already collecting approximately $13.4 million from Fuller, finds that his agreement gives him $3.75 million in stock and options "which represents a portion of the compensation, benefits and/or equity that you will forfeit". We’re guessing that refers to the $4 million in "savings" that Fuller touted in its release last week. At OI, Stroucken’s salary will be $950K with a guaranteed minimum bonus of $1.4 million and the chance to collect as much as $2.85 million. There’s also 50 hours of personal jet usage, a driver, a home security system and, oh yes, relocation expenses which was also part of Stroucken’s deal with Fuller.

In the end, that leaves us with two companies, three executives engaging in musical chairs and lots of money being doled out to facilitate those changes. We’re quite sure that’s what the folks on the Paulson Committee mean when they fret about Wall Street losing its competitiveness.

*Earlier today (12/5), a reader brought this O-I release from July 27 to my attention, which talks about McCracken undergoing surgery for a malignant stomach tumor. So while it’s true that companies routinely cite "personal reasons" for a CEO’s sudden departure for things a lot less serious than cancer, McCracken’s illness appears to be the key factor behind his departure from O-I, even though the company did not say that in the Nov. 8 release.

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