Is Office Max playing Moneyball?
After spending more than three decades working for a company that makes office equipment, one might expect that a guy would grow weary of meetings about new copiers that reduce paper jams and improved toner formulas. But in the right context – a new job, a hefty paycheck, and an expanded line of cool office supplies – maybe the drudgery of talking about office supplies isn’t that bad.
We’re talking about Michael MacDonald, the former Xerox (XRX) executive who recently joined OfficeMax Inc. (OMX) on August 15 as its new executive vice president and president of the global contract organization.
According to an 8-K that Office Max filed earlier this week, MacDonald most recently worked for two years as an executive adviser at a management consulting firm. Before that, he spent 32 years climbing the ladder at the Xerox, where he started in 1977. By the end of his tenure there, MacDonald was one of the company’s top executives; he made just over $500K a year in 2006, though he doesn’t appear to have gotten a golden parachute when he left — or at least one that we’ve been able to find.
So what could lure him back into a world filled with reams of paper and brilliantly-colored office supplies? Well, for starters, he’s getting a base salary of $600,000 per year. He’s also eligible to earn another $390,000 (or 65% of his salary) in the form of an annual target incentive bonus, the terms of which are set out in the company’s March, 2011 proxy. The filing adds that if MacDonald receives any bonus in 2011, it will be pro-rated and based on his start date.
OfficeMax also agreed to pay MacDonald another $550,000 in long-term equity awards. Sixty percent of the award ($330,000) will be granted as stock options, while the other forty percent will be in the form of performance-based restricted stock units (RSUs). The filing notes that “…as an inducement to accept his position, Mr. MacDonald’s long-term incentive award will not be pro-rated based on his start date.”
The filing adds that he will be covered by Office Max’s executive officer severance pay policy, and – although he hasn’t done so yet – MacDonald and the company are expected to sign off on a non-compete agreement and a change in control agreement.
MacDonald and Steve Mongeau (also hired August 15 as the new senior vice president of sales and growth initiatives, but Mongeau’s employment terms have yet to be disclosed) join an executive team led by another relative newcomer: Current president and CEO Ravi Saligram just signed on last November (this post had the details). Last August, Office Max also gave retention awards to two other Named Executive Officers worth more than a collective $1.42 million.
Shareholders are no doubt hoping that all of these expensive changes to the executive team will help the stock, which has fallen about 54% over the past year. But as Michael Lewis’ book Moneyball proved, sometimes throwing money around doesn’t always work.
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