The $7.3 million goodbye at Knight Capital…

November 17, 2011

We’ve joked before that when journalists see three of something, it’s a trend — and two is most of the way to three. So when we saw institutional brokerage and market-maker Knight Capital Group (KCG) hand a departing executive millions for the second time in 15 months, we looked a little more closely.

This time, the executive is Executive Vice President Gregory C. Voetsch. His departure (as of October 31) was announced November 1 as part of a broader reshuffling of the company’s various operations, and the press release describes him as having “voluntarily resigned his position to pursue other opportunities.” That’s one of the oldest business clichés in the book, of course, but sometimes even clichés can be true, after all.

Voetsch gets $4.1 million in cash to help him along with whatever those opportunities might be. He’s also getting $3.2 million more to cash out his unvested restricted stock, and company health insurance for 12 months. In return, he won’t compete with Knight Capital for six months and won’t try to poach employees for a year — and he’s promised to avoid badmouthing the company forever. The company can’t diss him in public either, but we were struck by just how specific the limitations are on Voetsch. The agreement itself spells out:

“You agree you shall not issue, authorize, or condone comments or statements to the press concerning Knight or any of its parents, affiliates, officers, or vectors other than to say ‘I cannot comment.’ You shall notify Knight’s General Counsel if you have been contacted by the press or broadcast media.

As regular readers might guess by now, this kind of payout doesn’t quite mesh with the proxy’s description of the severance Voetsch would ordinarily be eligible for under various scenarios. Termination “in a manner which would have made [him] eligible for severance” would have secured him a maximum of 26 weeks’ salary, or $125,000, had he been canned last December 31. Retirement would have accelerated the vesting of some of his restricted stock units, but only to the tune of $1.4 million as of the end of 2010. This is how the proxy wraps up the section that describes severance terms for Voetsch and others:

“Other than in respect of accelerated vesting of equity awards as described above, none of the Named Executive Officers are entitled to any compensation or benefits on a voluntary termination of employment, death, or disability that is different than the compensation and benefits provided to Company employees generally. “

Amusingly, as is so often the case, the agreement also includes detailed prohibitions on disclosing its terms — so specific that it creates a explicit exception allowing Voetsch to “discuss this Agreement and Release with your spouse … [and] your attorneys…”, among others. Never mind that the company would be filing the document with the Securities and Exchange Commission for all to see.

As we mentioned, Voetsch isn’t the first Knight executive to get big bucks on the way out. In August of last year, Sonya footnoted the departure of Gary Katcher, who had joined the company a couple years before with its acquisition of boutique bond brokerage Libertas Holdings. He got $4.6 million cash, and was also cashed out of 114,426 restricted shares — and Knight Capital promised to invest up to $12.5 million in a hedge-fund created by Katcher within two years.

Given that neither side is supposed to say much of anything, this filing is likely to be the last word we have on the subject, at least until the company’s next proxy comes out, detailing payments made to executives this year. Maybe then we’ll also find out what happened with the $12.5 million that Knight promised to invest with Katcher last August.

Image source: wwarby via Flickr

Data source: Morningstar Document Research

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