It’s been awhile since we’ve checked in on Vonage (VG), the once high-flying alternative phone company whose ads are still all over the place. But last time we checked in, they had just hired former Cingular marketing executive Mark Lefar to serve as CEO. Last August, Vonage had agreed to pay Lefar handsomely — $850K in salary and another $865K to “compensate the executive for early termination of his prior business affairs”.
And what a year it has been under Lefar. When he joined the company, Vonage stock was trading at around $1.50 and a little over a year later it’s trading at around $1.40.
So what does the Vonage board decide to do? Well, reward Lefar, of course. In an amended employment contract attached to the 10Q the company filed late Friday, the salary is the same. But the travel benefit more than doubles. Under the old agreement, Vonage covered up to $250K in travel expenses between Lefar’s home in Atlanta and Vonage’s headquarters in Holmdel, New Jersey. But in the new agreement, that amount was increased to $600K.
Doing some quick back-of-the-envelope math, that works out to a lot more than weekly trips to Atlanta to see the family back home, even if you assume that each time he flies, it’s in a Gulfstream V. So what’s the extra money going for? The contract doesn’t really address that.
But wait — there’s more. In addition to the $600K for private air travel, the company has also agreed to reimburse Lefar for “an amount equal to the cost of commercial air travel for each trip (i.e., the cost of a first-class, fully refundable, direct flight booked one week prior to travel) while employed during the Term.”
So he’s getting up to $600K to fly on the private jet and he also gets additional money to fly commercial? What kind of sense does that make? Has Lefar figured out a way to be in a Gulfstream and a Delta 737 at the same time?
Even if this were a far healthier company, it would be hard to justify this sort of expense as legitimate. But Vonage is not that company so it seems even more out-of-whack.