Give investors some oxygen…

June 7, 2006

Yesterday, on the very same day that shares of Rotech Healthcare (ROHI) hit a new 52-week low after being in freefall for much of the past year, according to this chart filed in the proxy yesterday, the company disclosed that CEO and President Philip Carter received a bonus of over $1 million. The stock of the company that provides oxygen and other home medical supplies has continued to fall since the beginning of the year, largely due to concerns over Medicare reimbursements.

Now perhaps you’re curious how a company awards that kind of bonus — a bonus that was nearly 17% higher than the one he received in fiscal 2004 — given what happened to the stock. After all, shouldn’t executives like Carter share some of the pain that investors have experienced? For that, we turn to the compensation committee report, which explains how the bonus was set:

In 2005, the compensation committee adopted a cash bonus plan to provide the Company’s executive officers with bonus compensation upon the achievement of certain financial objectives related to the Company’s 2005 revenue, earnings before interest, taxes, depreciation and amortization (EBITDA), earnings per share and the achievement of certain strategic goals. The target levels established in the 2005 executive officer bonus plan and individual performance objectives were substantially achieved

Granted, there’s no mention of stock price in this formula. But it doesn’t dismiss the fact that investors have no real idea exactly what specific goals Carter has achieved to warrant the $1.01 million bonus. Of course, there is a bit of a silver lining: at least Carter didn’t try to collect any more relocation expenses after receiving more than $225K in 2003 and 2004 for his move from California to Orlando. Still, given the current state of the stock, Rotech may want to think about giving investors some of the oxygen it normally sells to its customers.

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