Follow the spin…

images1.jpegYesterday, H.B. Fuller (FUL) announced that it had reached a separation agreement with outgoing Chairman and CEO Al Stroucken, who is leaving on Dec. 1 to take the CEO job at Owens Illinois (OI). In the release, Fuller noted that the separation agreement with Stroucken, which would result in a $5.9 million after-tax charge for the fourth quarter, was actually saving the company money because, "Under the separation agreement, Stroucken received $4 million less in payments and other benefits than he would have received had he instead chosen to leave the company at the expiration of his employment on March 31, 2007."

The problem, of course, is that Stroucken’s decision to take another job will still cost Fuller’s investors plenty of money. In addition to the $5.9 million charge in the fourth quarter, there’s another $1.5 million charge in fiscal 2007. Based on fourth quarter 2005 numbers, the $5.9 million represents a whopping 20% of operating income. So what’s in the separation agreement? Roughly $13.4 million in various payments that are spread out over the next few years (and which are likely to lead to additional, albeit, smaller charges) including $1.7 million in "incentive compensation continuation". Also part of the agreement is a deal to pay for his relocation to another city of his choosing, which we’re betting will be somewhere near Perrysburg, Ohio. Isn’t that something that the new company should be covering? Remember: this is a guy who is leaving to take a better job. Shouldn’t that be reward enough instead of having to hand out all sorts of crazy extras and then try to spin it as a good deal for investors? There’s also the 568,630 shares of Fuller stock that Stroucken owns as of the last proxy. At least one Fuller employee is already griping on Yahoo’s board that the fourth quarter charge will impact employee year-end bonuses

Meanwhile, Owens Illinois has yet to disclose the details of Stroucken’s compensation package (or how much they’re paying Steven McCracken who is stepping down as CEO for the oft-abused "personal reasons"), it’s safe to bet that it won’t be pocket change.