More comfort ahead for La-Z-Boy execs…

With recent news articles bearing headlines such as “The Gory Details of La-Z-Boy’s Double Miss” (about La-Z-Boy, Inc.’s (LZB) recent failure to meet estimates on either revenues or earnings per share), one might assume that things aren’t so comfortable for the folks running the company.

But that assumption would be wrong on at least a couple of fronts. First, the stock price is up approximately 26% over the past year. And for those most intimately involved in the company’s workings — its officers and directors — there is good news that will boost their paychecks, as well, according to the proxy that La-Z-Boy filed yesterday.

First, the total compensation numbers rose substantially for all of the named executive officers from fiscal 2011 to fiscal 2012. Exhibit A? Chairman and CEO Kurt L. Darrow’s total compensation rose to $4.2 million from $1.8 million the prior year. In addition to his $816,651 in salary, he got a $2 million stock award and another $510K in options, as well as a $882,000 bonus. The stock awards increased more than 2.5 times compared to the prior year’s award of $748,728, but all of the categories were significantly higher than in the prior fiscal year.

We noticed another interesting disclosure that pertained to his long-term equity awards. Whereas for fiscal 2012 Darrow (and the other NEOs) received equity awards that were 75% performance-based shares and 25% stock options, that allocation is changing for fiscal 2013. Now, the executives are set to receive equity grants that will be in the form of 50% performance-based shares and 50% stock options.

Darrow is certainly no La-Z-Boy-come-lately. He has been with the company since 1979 and climbed through the ranks as the decades ticked along. He has been president and CEO since 2003, and he became its Chairman of the Board since 2011. The company didn’t specifically explain why Darrow’s compensation more than doubled in the past fiscal year, but it did note the following achievements in the “Compensation Discussion and Analysis” section:

“Capitalizing on our efficient operating structure, brand strength, a strong network of proprietary distribution and better execution throughout our business segments, we continued to grow sales and profits. We also strengthened our balance sheet, ending the year with more than $150 million in cash and less than $10 million in total debt.”

Directors, too, got some good news recently. After working with an independent compensation consultant, the board decided to eliminate their meeting fees and double their annual retainers to $70,000. Committee chairs will get a few thousand dollars more for their leadership roles, and each director will also get restricted stock units worth $70,000 on September 1, 2012 (a $5,000 increase in the value of the RSUs).

The filing noted that at the annual shareholders’ meeting in August, 2011,

“…97% of the votes cast by our shareholders were to approve the compensation we paid to our named executive officers in fiscal 2011. Our compensation committee took this result into account in determining compensation policies and setting compensation and will consider such results in the future.”

There is a lot to consider when it comes to assessing an executive’s performance, and the vote-wielding shareholders are the ultimate judges who must determine whether the company is being run to their satisfaction. But we can’t help but wonder whether their approval rating will fall some in response to the insiders’ own compensation numbers rising so quickly.

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