Gold star Fridays…

June 18, 2004

On a day when the New York Times points out in a front page story that the movement to reform corporate governance is losing momentum, I thought it would be nice to bring back Gold Star Fridays. Hard to believe that it’s been about six months since I’ve pointed out something positive buried deep in a company’s filings. But in Stewart Enterprises’ (STEI) recent 10-K, the funeral giant actually provides detailed information on how and when its new CEO will receive his year-end bonus. Most companies simply make oblique reference to certain performance goals leaving investors guessing about what those goals are. But in Kenneth Budde’s contract, which was included in the K, earnings goals and bonus amounts are clearly spelled out. In fiscal 2004, for example, the company reported 40 cents a share in diluted earnings which translates into a bonus of 57.5% of Budde’s prior base salary of $300K or $172.5K. In fiscal 2005, when analysts expect the company to report 46 cents a share, the bonus will follow a bit more complicated formula: if earnings come in at or below 46 cents a share (the current estimate), then there’s no bonus. But if they’re higher, Budde will have access to a $750K bonus pool, with 75% of that money tied to meeting certain EPS goals. The remaining 25% will be discretionary. Sure — it’s a lot of math. But it’s also a step in the right direction.

Leave a Reply

You must be logged in to post a comment.