Learning CEO-speak at Rosetta Stone…

Rosetta Stone learning about languages for saleStationed in nearly every airport, major train station and shopping mall, Rosetta Stone (RST) retail kiosks remind us of all the languages we’ve yet to learn. But even as the language-learning software company boasts 31 languages to choose from, one course seems to be missing: CEO-speak, especially when it comes to the fine art of negotiating an exit plan.

A brief 8-K filed last Thursday discloses benefits for chief executive Tom Adams’s transition to his new position as chairman of the board. But the benefits themselves didn’t catch our eye as much as the fact that Adams was eligible for them at all.

Aside from a $575,000 bonus, his transition package comes with

“those benefits under his employment agreement with the Company to which he would be entitled if his employment had been terminated without —cause— (as such term is defined in Mr. Adams’ employment agreement).”

According to Adams’s employment agreement (an exhibit to an S-1/A from 2009), these include accrued compensation, fifteen months of insurance, a cash lump-sum of fifteen times his basic life insurance premium, and a twelfth of his base salary (which comes to about $35,500 if we consider his 2010 salary of $425,000).

But wait — these benefits are supposed to be for “termination without cause”. Yet the 8-K in question makes it clear that Adams initiated the transition himself:

“Tom P.H. Adams . . . proposed, and the Company’s Board of Directors . . . has accepted, a plan to transition from his position as President and Chief Executive Officer to Chairman of the Board, upon the identification of a successor to serve as the Company’s president and chief executive officer.”

It’s not just a matter of wonky definitions either. The employment agreement says Adams is terminated without cause only if the board of directors unreasonably fires him. As far as we can tell, no one is being fired, unreasonably or not.

That’s where a course in CEO-speak would come in handy. It might help us understand how Adams managed to negotiate such an exception to an already-inked agreement.

Rosetta Stone’s revenue has grown twenty-five-fold since Adams came aboard, and he played a big role in taking his company’s products global and into corporations. But at the same time, Rosetta’s stock has lost 66% since its April 2009 IPO. And as much as we don’t think stock-performance should be the only barometer, we’re pretty certain investors can’t be happy with those results.

Perhaps when Adams is able to focus on big Chairman-like thoughts while someone else is charged with the daily grind of running a company, things might get better for Rosetta Stone’s investors. Maybe one of those big-ideas should be offering a course in CEO-speak to help others negotiate such nice exit packages. We’re quite sure there would be a booming market in that.

Image source: Wesley Fryer via Flickr

This post was written by footnoted intern Andy Cheng, a junior at the University of Chicago.


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