Hefty payout for Office Depot’s departing CEO…

October 28, 2010

Last Friday, we reported that Office Depot, Inc. (ODP) had settled a case with the Securities and Exchange Commission and paid a $1 million fine. According to the SEC, company insiders had violated federal disclosure rules by tipping off selected analysts that earnings would not meet estimates. In addition to the company’s fine, two executives, CEO Stephen Odland and former CFO Patricia McKay, each paid a $50,000 fine without admitting or denying that they had done anything wrong.

Over the weekend, Odland and Office Depot’s board reportedly made a mutual decision that Odland would step down on November 1. While the company has made several filings about the departure, we found one of the footnotes in the 10-Q to be particularly interesting:

Mr. Odland will receive severance and retention payments of approximately $10 million, as well as vesting of remaining long-term equity awards and a pro rata portion of 2010 earned bonus, payable in 2011.

If you read that footnote carefully, you quickly realize that the $10 million is just the headline number. The Sun-Sentinel in Florida picked up the $10 million number and simply added the word plus to cover all the options involved. So we tried to do a bit of the math to figure out how much more Odland will be receiving.

It wasn’t easy. In fact, when we dived into Office Depot’s most recent proxy, which was filed on March 12, we began to really appreciate clearly written proxies, as opposed to those designed to obfuscate and confuse. There’s a footnote at the bottom of page 38, which notes that Odland has 192,251 time-based shares that will vest early, thanks to the acceleration clause. If that assumption is true, then Odland will get another $915,115 from those shares, based on the current trading price of $4.76 per share. But there’s also this Form 4 from last month to take into consideration. In it, we see that Odland exercised two tranches of options — 510,000 each — at prices far below where the stock is currently trading and owned close to 2 million shares of Office Depot stock. Unlike many Form 4s, there’s no helpful footnote to provide additional details.

Considering that Odland has been the CEO at Office Depot since March, 2005, one wouldn’t necessarily expect him to leave empty-handed. But the departure seems unexpected, given the fact that Odland just signed a new employment agreement in February, 2010 that was supposed to remain in effect through March 11, 2011. (It actually could have continued past that date, since it had automatic renewal provisions.) There’s also the fact that during Odland’s tenure, the stock hasn’t exactly outperformed.

Also yesterday, Office Depot filed a press release and 8-K which added the fact that Odland “will act as a consultant to the Company through December 31, 2010 in order to enable a smooth transition.”

While the filing doesn’t reveal how much the company will pay Odland for his consulting services, the hefty payout he’s getting on his way out the door should enable him to make a few “smooth transitions” of his own.

Image source: CO-PhotoGuy via flickr

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