Executive pay: Is the columnist worth it?
Published: Sunday, May 20, 2012 at 3:00 a.m.
Last Modified: Friday, May 18, 2012 at 5:09 p.m.
As part of this proxy statement for the annual meeting of shareholders of Old Sport Inc., the Compensation Committee of the board of directors (the Committee) furnishes the following report on executive compensation paid or awarded to the Columnist for 2011.
The Committee acknowledges the controversy surrounding so-called “excessive” executive pay. Sure, there are record levels of income inequality in this country, but really. Is it really our guy's fault? Should we punish this achiever for his success? And, since he sits on the compensation committees of the companies run by members of the Committee, do we really want him to retaliate? Clearly the answer to all of these questions is no.
The Committee determines compensation for the executive officer(s) of the company, to wit, the Columnist. The Committee consists solely of slightly independent members of the board, some (but not) all of whom are related to the Columnist and others of whom may be his dog.
To assist it in administration of the company's executive compensation program, the Committee has authority to retain independent experts and advisers. The Committee chose to rely solely on the aforementioned dog.
The goal of the company's executive compensation program is to attract, motivate and retain the Columnist who is critical to the company's success, while holding him accountable for his own and for the company's performance. (Never mind this part).
The total value of compensation delivered to the Columnist is highly variable, based on such performance.
If the performance is good, the compensation is good. If the performance is not good, the compensation is even better. We told you it was highly variable.
The components of compensation are designed to align the Columnist's interests with those of stockholders, except as the interests of the Columnist are way, way more important.
Cash compensation consists of two components: base salary and performance bonuses.
Base salary primarily is determined by competitive pay and individual job performance. The Committee's strategy is to align the Columnist's pay with others in his comparator group, i.e., top professional athletes and movie stars.
Competitive pay practices are determined from the best available information, including compensation surveys, proxy-statement disclosures and the advice of Professor Ernest Swag. (For purpose of this discussion, “swag” is an acronym for scientific wild-assed guess.)
Performance bonuses are used to bring the Columnist's total cash compensation to targeted levels.
For example, if the total cash compensation falls short of the targeted level for a new yacht, performance bonuses may be used to close the gap.
Total cash compensation is targeted at a level commensurate with the company's relative performance versus its competitors, unless competitors are doing way better, in which case, forget it.
If the company performs better than competitor companies on identified performance measures, the Committee will generally give all the credit to the Columnist and adjust his compensation accordingly.
To promote retention and align Columnist's interests more closely with those of stockholders (like that's going to happen), the Committee grants long-term equity compensation, generally consisting of a mix of stock options and restricted stock units.
Also, should the Columnist choose to live on a farm, the Committee will buy it for him and grant him stock in the form of cows, horses, llamas, ostriches, etc.
Stock options are granted at 100 percent of fair market value on the date of grant. If the stock fails to show appreciable gains, never mind.
Restricted stock units are designated in shares of common stock and generally vest four years from the date of grant. Until vesting, the grantee receives an annual cash payment equivalent to the dividends paid on the number of shares yada, yada, blah, blah, blah. He'll make out like a bandit.
Reflecting the company's culture of respect and value for all employees, the benefits received by executive officer(s) are the same as received by other employees except for medical and life insurance plans, pension, liquor and car allowance, vacation and other allowances, which are ridiculously better.
Perquisites: The board of directors determined that for “security reasons,” it is in the company's interest to require the Columnist to use company aircraft for all travel.
You ask, “Has there ever been a security threat to the Columnist?” We say, none of your beeswax. The security reason is that he feels more secure on the company jet.
It goes without saying that the Company's interests are best served if the Columnist belongs to the best country and social clubs, at least the ones that will admit him.
For security reasons, the Company will pay greens and cart fees and grant him one stroke — no, make that two strokes — per hole.
The Committee believes these compensation levels are fair and commensurate with the value to the Company provided by the Columnist.
The dog agrees.
Kevin Horrigan is a columnist for the St. Louis Post-Dispatch.
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