What’s good for the stockholder at Questar __»

June 17, 2010

Natural-gas company Questar Corp. (STR) is spinning off its exploration and midstream unit — along with its energy trading operations and some other elements — into a company that will trade as QEP Resources (QEP). Stockholders will get a share of the new company’s stock to supplement each share they own of the existing one.

The spin-off is to go through on June 30, Questar tells investors in the 8-K it filed on Wednesday, and it’s good for investors because the company’s

“board of directors believes that the separation of our exploration and production and gathering and processing businesses from our regulated utility and pipeline businesses and Wexpro will create significant value for shareholders. — Although there can be no assurance, we believe that, over time, Questar common stock and the common stock of QEP should achieve a greater aggregate market value, assuming the same market conditions and continued good execution, than would be achieved in our current conglomerate configuration.”

There certainly can’t be any assurances — and Questar isn’t asking its current chairman and chief executive, Keith O. Rattie, to take much in the way of chances.

The company’s April proxy statement lists Rattie as owning about 1.5 million shares, so presumably he’ll benefit right along with the rest of the company’s shareholders. But the company is making sure he gets some of his now, in addition to stock appreciation later.

He’s slated to get a lump-sum payment of $4.65 million on his resignation as CEO when the spinoff goes through, plus another $1.5 million “recognition bonus payment” for a job well done. Together, that’s a little above the $5.5 million he earned last year — and that’s the all-in figure, counting salary, stock, options, cash bonus, pension accrual and perks. Plus, his options and restricted stock will vest immediately — a portfolio valued at about $3.5 million as of Dec. 31, the proxy notes.

Rattie will also stay on as chairman of Questar, earning him a $200,000-a-year annual retainer, on top of the usual fees for a board member; those start at $50,000 and totaled around $180,000 for most of the board last year. He’ll also get $1 million in restricted stock units from the newly slimmed-down Questar — essentially IOUs from the company that track its stock and vest over three years.

Now, we’ve never been purists when it comes to aligning executive pay with stock performance. Executives and their families have to eat too, and except in rare cases it doesn’t make sense to expect even CEOs to get all their compensation in the form of stock. Yet, when a spin-off is touted as a great thing for shareholders, it’s sobering to see the CEO extracting north of $10 million up front for arranging it.

Image source: todbaker via Flickr

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