Why is Centex handing out so many options to its CEO?

Later today, the National Association of Home Builders will release its monthly homebuilder sentiment index and by all accounts it is expected to be pretty gloomy.

Given that backdrop, the 8K that Centex (CTX) filed late yesterday certainly seems interesting. While the filing tackles a number of different issues related to last week’s shareholder meeting, where investors approved declassifying the board of directors, the thing that caught my attention was the bounty of options that the board’s Compensation and Management committee gave to Centex’s Chairman and CEO, Timothy Eller, the day before the annual meeting.

As the filing notes, the committee granted restricted stock to four named executives and 11 other individuals. In the filing, only the four NEOs are named. To say that the distribution of that restricted stock is not equitable would be a mild understatement. Eller’s restricted stock is valued at $5 million; the next three executives, including CFO Catherine Smith, get $1.5 million as a group. It’s not clear from the filing how much the other 11 are getting. Here’s how the board describes its’ decision:

The Compensation Committee determined that the retention of the Award Recipients and the other awardees is critical to the future success of the Corporation, given the importance of the services they are engaged in providing at the current stage of the business cycle. None of the Award Recipients has an employment agreement with the Corporation. Accordingly, the Compensation Committee made these awards to ensure the stability of the Corporation’s leadership team by providing an incentive for these individuals to remain with the Corporation during the four-year period that the awards vest (five years for the CEO).

Given Centex’s performance so far this year, it’s easy to see why some additional incentives may be necessary here. Still, presumably Ellis can’t fix Centex on his own, so giving him a much bigger chunk seems puzzling at best.