Spin-off pays off for home products exec…

March 6, 2012

Fortune Brands Home Security, Inc. (FBHS) – maker of such brands as Moen, Master Lock and more – got off to a bit of a rocky start when it was spun-off last October from Fortune Brands, which is now known as Beam Inc. (BEAM). For its top executive, however, the post-spin-off journey has been decidedly smoother.

The company filed its proxy yesterday, and we found the compensation given to chief executive Christopher J. Klein especially noteworthy. Whereas in fiscal 2010 Klein received total compensation valued at $3.65 million, in fiscal 2011 that number rose to more than $10.4 million. Granted, a large percentage of that increase came from the spin-off, but it was still a more than three-fold increase, nonetheless.

Klein’s salary rose from $700,000 to $774,500, but his biggest gains were in equity awards. The footnotes to the Summary Compensation Table explain that included in the nearly $4.2 million in stock awards (up from $1.28 million the prior year) is a $3.3 million “one-time Founders Grants of RSUs awarded in connection with the Spin-off.” The terms of the RSU grant require Klein to remain employed by the company or a subsidiary in order to vest over the next four years. He also had some outstanding performance shares from the old company that were converted into RSUs of the new company “based on actual performance through September 30, 2011 and target performance for the remainder of the performance periods.”

In addition, Klein got more than $3.98 million worth of stock options; and – once again – footnotes explain that $3.3 million of those are one-time Founders Grants of Options awarded in connection with the Spin-off. Those, too, will vest over four years. Nevertheless, they’re a hefty increase from the $480,470 in stock options that he received in FY 2010. Add a bonus of practically $994,000, a boost in his pension and deferred compensation account, and more than $154,000 in “Other” compensation, and suddenly Klein is a $10.4 million-dollar-man.

Granted, shareholders may not be particularly concerned. While the stock fell initially after the spin-off last Oct. 3, it’s now up more than 56%, despite a fourth quarter loss of $0.44 per share (on higher sales).

When the most recent earnings were released in early February, Klein stated that the company “continued to win in this challenging environment, and we are poised to keep the momentum going.” Given the significant boost he received to his own compensation, he certainly has every incentive we can imagine to deliver on that promise.

Image source: Connected locks via Shutterstock

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