Of proxy fights and raises at AOL…

February 28, 2012

When it comes to reading filings, it’s easy to get immersed in the details. Sometimes you get a better picture, and a more entertaining one, by taking a step back.

That’s the case with AOL (AOL), which is facing a feisty proxy battle with Starboard Value LP, an activist investor (it owns 5.2% of AOL’s shares) that not long ago won three seats on the board of hair-cuttery Regis Corp. (RGS). The battle had been rumored for a week or so, but finally broke out into the open on Friday with a DFAN14A filing including a letter from Starboard to AOL’s board, and bios of the investor’s five nominees. All the appropriate reporters and pundits jumped on it.

The same day, it turns out, AOL made some filings of its own. Among them were an 8-K with a cheery letter (“Go AOL”!) and less cheery press release from Chairman and Chief Executive Tim Armstrong responding to Starboard, an 8-K officially disclosing the resignation two days earlier of Chief Technology Officer Alexander Gounares “for personal reasons and to pursue other interests” (he doesn’t have to repay any of his signing bonus in return for sticking around during a transition period), and then, of course, AOL’s 10-K, or annual report.

Even if there were no other filings to pay attention to (and that’s hardly the case since there’s a major 10-K deadline tomorrow), that would still be a lot of filings to get through. But we decided to dive in and found this pretty straightforward amendment to the employment contract with General Counsel Julie Jacobs attached to the 10-K. It bumps her base salary up to $600,000 a year. That’s nice, of course, but it’s particularly nice compared to the $500,000 she was making before, thanks to a prior employment agreement amendment in Mach 2011.

But it’s nicer still when compared to the $450,000-a-year salary she was promised in the employment agreement she got in June 2010 (but retroactive to May 10, 2010). By our calculation, that means Jacobs has seen her salary rise by $150,000 (or 33%) over about a year and seven months. Not too shabby. (Add in bonuses, stock and options, and she made $3.9 million in 2010.) In the 21 months since the original employment agreement kicked in, AOL’s shares, by contrast, have fallen about 22%.

That said, Jacobs clearly has a lot on her plate, not least of which is this new proxy fight. In addition to her role as general counsel, after all, she’s also corporate secretary of AOL. Although it was filed just last week, the amendment bumping up her salary actually came on December 13, retroactive to December 1. In its February 24 letter to AOL’s board, Starboard Value mentions two months of ongoing dialog — suggesting the talks started some time around Christmas, not long after Jacobs got her raise. We can’t say whether the extra pay came in response to the extra work — the timing suggests otherwise — but it works out fortuitously for Jacobs.

We don’t know enough about Starboard or the ins and outs of AOL’s performance and strategy to weigh in on the proxy fight itself. As spectators, of course, we find it entertaining enough, and hopefully it’ll work out well for shareholders (and employees, for that matter).

So far, Jacobs seems to be doing pretty well, anyway. And hey, the bios we’ve seen say she’s 45 now — if her salary keeps rising by 33% every 19 months, she could be making $18.4 million a year in salary alone by the time she reaches retirement age.

Image source: One hundred dollar bill staircase via Shutterstock.com

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Proxy fights can be entertaining from the sidelines. But when you have money at stake, spotting early signs of trouble can save you money and headaches — and spotting opportunities early means more time to cash in. At footnotedPro, we comb through SEC filings to find what other investors miss. Last year, we called four M&A targets weeks or months ahead of an announcement. For more information about subscribing to footnotedPro, or to inquire about our 2012 M&A report, contact us.

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