Wendy’s exec said “No go” to Ohio…

November 14, 2011

While none of the footnoted staff lives in Ohio, we suspect that it’s a lot like everywhere else: There are wonderful qualities and opportunities that make life enjoyable, and there are also challenges to living there. But the prospect of moving from Atlanta to Ohio was too much for a second top executive at The Wendy’s Co. (WEN), prompting him to resign while leaving with several million dollars. (We wrote a post last May about Wendy’s first Ohio-related resignation.)

The departure of Roland Smith, the company’s President and CEO, was actually announced in a two-sentence section of an 8-K filed September 2. The rest of the filing introduced Smith’s successor, Emil Brolick, and disclosed the terms of Brolick’s employment agreement and deferred compensation plan (the subject of this September post). What was clearly missing, though, was any explanation for Smith’s exit or a disclosure of what the company might pay him on his way out the door.

We now have the answers to those questions, thanks to the 10-Q and attachments that Wendy’s filed with the SEC on November 9. You may recall that – until recently – Arby’s (headquartered in Atlanta) used to be part of Wendy’s. But once Arby’s was sold, Wendy’s didn’t need the Atlanta base. The company decreed that all of its top executives would be based in Dublin, Ohio.

Smith sent the company a couple of letters, including this September 1 letter attached as an exhibit to the 10-Q. After referring to his December, 2008 employment agreement, Smith then explained that he didn’t want to move to Ohio, and that the company’s request that he do so breached a promise in his employment agreement (specifically, that the company wouldn’t “without your consent, [require you to relocate] to a work situs not in the Atlanta, Georgia greater metropolitan area”). Here’s a snippet from the exhibit:

“This letter agreement supplements my earlier letter agreement with the Company dated July 20, 2011 regarding the relocation of the Company’s headquarters and the occurrence of a —Triggering Event under the terms of the Employment Letter Agreement. This letter agreement is being delivered in connection with the offer of employment made recently by the Company to a candidate to assume the position of Chief Executive Officer of the Company, with such employment to commence on or about September 12, 2011.”

We can’t tell you what the July 20 letter says because it was never filed with the SEC. However, it’s clear that the company knew that Smith’s resignation was coming, since Brolick’s arrival and the announcement of Smith’s departure occurred simultaneously. And the 10-Q itself has a brief section at the bottom of page 26 which disclosed that:

“…in accordance with the termination provisions of [Smith’s] related employment agreement, the Companies incurred termination costs of $12,568 (principally for required payments of $7,987 and vesting of previously issued stock awards of $4,581) in the third quarter of 2011.”

Don’t be fooled, though: Those figures are “In Thousands Except Per Share Amounts,” so we’re really talking about millions here.

Although Smith officially ceased serving as the CEO and President on September 12, he is still working as a “Special Advisor” and director until December 30, 2011. Smith’s letter confirms his arrangement with Wendy’s: He would “provide advice and counsel as requested,” and the company would continue to pay him “at the same compensation level (including without limitation salary, bonus and employee benefits)”. The April, 2011 proxy revealed that Smith’s base salary was $1.15 million, on top of which he received a bonus and equity awards that bumped his total compensation up to more than $4.91 million. Thus, he is set to earn quite a bit more before he and Wendy’s part ways at the end of the year.

But don’t despair, Ohioans. Despite the fact that some of Wendy’s executives don’t want to live in your state, we know that any place that inspired Leonard Bernstein and company to write “Ohio” (from the musical “Wonderful Town”) must be a very nice place indeed.

Image source: bearclau via flickr

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