Sweetening the pot at Iconix Brand Group…

June 23, 2011

It seems slightly incongruous that a company which owns a 50% stake in Madonna’s worldly “Material Girl” brand also owns an 80% stake in the nostalgically innocent Peanuts brand. But the company involved, Iconix Brand Group, Inc. (ICON) has a big, diversified empire. Following its 1993 purchase of Candie’s, Iconix continued to grow; in fact, it gobbled up 15 additional brands since October, 2004 that range from London Fog and Danskin to Badgley Mischka.

But even more impressive than the range of Iconix’s business portfolio – and the fact that its stock price is up about 50 percent since last year – is the new expansion to Chairman of the Board, President, and CEO Neil Cole’s compensation. Iconix filed the terms in an Amended Employment Agreement that’s attached to this June 20 8-K.

Even the fact that there is a new employment agreement for Cole is noteworthy: His prior five-year employment agreement, which took effect January 1, 2008, wouldn’t have expired until early 2013. But the new agreement – which runs through December 31, 2015 – gives Cole a 50% raise and a $3 million “Extension Sign-On Bonus,” to be paid in a lump sum no later than June 24, 2011. He may have to repay that if his employment at Iconix ends on or before December 31, 2011, but that seems unlikely to happen in the remaining six months of 2011.

With respect to Cole’s raise, he will continue to earn a $1 million base salary through December 31, but that number will jump to $1.5 million on January 1, 2012. Cole also has the contractual assurance that the board’s compensation committee can give him “such increases (but no decreases) as may be determined… from time to time.” If the company reaches certain performance goals, Cole is eligible to receive a cash bonus of up to 150% of his salary for FY 2011, and up to 200% of his salary in the years to come.

To give Cole further incentives to stay, on June 17, 2011, Iconix gave him restricted stock units (RSUs) with a fair market value of $4.5 million, as well as a jaw-dropping grant of performance stock units, described as follows:

“…in addition to the Existing PSU—s, on the Effective Date, the Executive shall receive a one-time grant of performance stock units of the Company (the —PSU—s) issued under the 2009 Equity Plan equal to a number of shares of Common Stock with a fair market value, as defined in Section 5.2, on the New Award Determination Date of Twenty-Six Million, Seven Hundred Ninety Thousand Dollars ($26,790,000).”

Both awards will vest in annual installments, ending on December 15, 2015.

If we add up the raise, sign-on bonus, and equity awards, the amendment gives Cole an extra $34.79 million (plus yet-to-be-determined bonuses) from Iconix over the next few years. That’s quite a bit more than he has received before, although his compensation at Iconix has fluctuated in the past few years, mainly because the size of Cole’s stock grants varied dramatically. According to its July 9, 2010 proxy – the most recent one on file – Cole’s total compensation rose from nearly $1.3 million in 2007, to more than $32.45 million in 2008 ($30.4 million of that were stock awards), down to $10.85 million in 2009 (including $8.3 million in stock awards). The numbers for FY 2010 aren’t available yet, but we anticipate that Iconix will file its 2011 proxy in the next couple of weeks.

All in all, the board gave Cole millions of new reasons to stay with the company. Now all he has to do is keep the company profitable and make sure that the stockholders get their share of the honey, too.

Image source: Unhindered by Talent via flickr

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