That's what Gannett's stockholders would potentially pay to CEO Craig Dubow and three other top executives, if they're canned within two years of what's called a "change in control," according to the most recent proxy report to shareholders, filed in March with the U.S. Securities and Exchange Commission. The relevant section starts on page 40. The chart detail, above, is from the document. I've reproduced it in full, below.
Dubow's payout would be the biggest: $36.3 million, the document shows. That includes an excise tax gross-up, another legal term meaning the company would pay $8.8 million in excise taxes, so Dubow, 53 (left), wouldn't owe the Internal Revenue Service anything on the value of his package.My $79 million total doesn't include nearly $19 million for now-retired newspaper division chief Sue Clark-Johnson. That figure is listed in the document, but it's not clear she'd be entitled to the loot after having left the company.
The document defines a change in control as:
- an investor's buying 20% or more of the company's stock
- a shift in the board of directors, where the incumbent members are forced out of a majority
- a sale or merger of the company
- Gannett's complete liquidation or dissolution
Here's a screenshot of the full chart, showing payouts after a change in control; click on the image for a bigger view:
Earlier: Retired Chairman and CEO Doug "McCorky" McCorkindale's super-sweet retirement package. (Hint: He and his spouse don't pay a dime for their health insurance.)Please post your thoughts in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.
[Credits: Hat tip, to Gannett Blog readers for helping with my research; Gannett SEC schedule 14A, March 13, 2008]
The whole GMC gets paid out!!!
ReplyDeletehttp://www.sec.gov/Archives/edgar/data/39899/000119312507055118/ddef14a.htm
Looks like they are motivated to make the stock drop. The only thing they lose is their big ego's!!! I think I would take that loss for a few million tax free dollars!
I am hearing that are a lot of late night meetings going on at HQ with the GMC the past few days. Seems like something is going down. Is anyone hearing (or seeing) the same?
ReplyDeleteIf you know someone in circulation you might get a 6 month half price subscription when you are laid off/terminated/bought off/sold!
ReplyDeleteThey've said they're buying back more Gannett stock now with profits. I've pondered here before that there may be more strategy here than meets the eye, and if anyone debunked my ponderings, I missed it.
ReplyDeleteIs it a bad thing that Gannett and other papers tanked the stocks? They buy back a big portion cheaply. What if they have a plan (maybe an Enronesque screenplay, maybe involving all Big Newspaper) in the can to push stocks back up and resell the stock they're buying up now at windfall profits?
It's worth reiterating: Gannett is still a profitable company. Does the disproportionate fall in stock prices compared with other industries make sense, especially with 10 percent dividends?
The investors' profits are above the rate of inflation and way above the effective decreases we're suffering in salaries and benefits. Does the Wall Street disfavor make sense?
Maybe it's time for the union to stop with the kid gloves and use this momentum to organize the entire corporation's workers.
The $79 million number is exactly what's wrong with executive pay. They win even if the company and the rank and file employee's lose. That is just plain wrong.
ReplyDeleteIt was not the rank and file that got the company in the mess that it is in now - it is the executive's poor decisions and the inability to take some risks that is the root cause.
So while the majority of Gannett employee's are wondering how long they will have a pay check, the top execs really don't give a hoot because they're winners all the way to the bank.
I know little about financial matters.
ReplyDeleteSo this $79 million goodbye kiss was basically a prenup? This was hammered out when Dubow was hired?
More absurd: SCJ getting more than her final paycheck for leaving Gannett. That $19 million figure is far more upsetting to me than Dubow's situation. She was just some chick coming up with goofy ideas for a living. She's a hack like the rest of us. WTF?
The plan that Gannett's board hatched, actually when Dubow was named CEO, is straight out of the 1994 movie, The Hudsucker Proxy. The board plots to secretly buy the company by taking it private, but first it has to drive down the stock price to get it for pennies. To make sure this happens, they promote a blockhead from the mail room, Norville Barnes (Tim Robbins), to CEO.
ReplyDeleteJim, see if you can find some of that image-morphing software, to turn Dubow into Barnes.
Unbelievable! For the life of me, I cannot understand why the large institutional shareholders are putting up with this shit. Sure, the dividends are ridiculously high, but they don't compensate for the massive drop in share value.
ReplyDeleteHey Jim, could you post a synopsis of how Dubow got this sweet gig? I want to let my kids know how to position themselves for a life of outlandish compensation in exchange for no discernible contribution to the company.
The Transitional Compensation Plan was put in place back in the early Curley years... This is the verbage from the annual report...
ReplyDeleteIn December 1990, the company adopted a Transitional
Compensation Plan (the Plan). The Plan provides termination
benefits to key executives whose employment is terminated under
certain circumstances within two years following a change in
control of the company. Benefits under the Plan include a severance
payment of up to three years' compensation and continued
life and medical insurance coverage.
The "tax Gross-up" doesn't make the payouts tax free.. it covers the additional excise taxes on earned income above and beyond the normal tax schedules that mere mortals never have to worry about.
ReplyDeleteThat $79 million is what is known as a "poison pill" to prevent takeovers and with any number of other executive employment contracts that are in effect the amount is much more. Remember that the annual report and Proxy Statements only have to identify the very highest paid individuals. Other things that would happen would be the automatic vesting of all stock options (which currently are worth nothing) stock grants and other performance benefits to the top 120. All of this was designed to make a takeover difficult and expensive.
ReplyDeleteThe $79 million is a 2.1% premium or penalty a takeover investor would have to swallow if they went after Gannett. If you include $19 million for Sue Clarks replacement the total is $98 million. Considering that number of high ranking corporate exec's that aren't inlcuded in the total could easily take the total over $100 million or a 2.6% premium to the market value of the company.
Don't really see what 1990 has to do with today since the plan the executive compensation committee developed in 2007 looks completely different to me. Seems the later one goes way beyond severence, death or disability and gets so very specific on the change of control provisions. Oh, and I see the comp. committee hired Pearl Myer & Partners in November 2007 to advise on executive compensation matters. (Wonder how much that cost). Hewitt Associates had handled that before, according to information given in the proxy.
ReplyDeleteI realize that it is easy to blame Craig and Gracia right now but where the company failed was back with McCorkindale. Under Doug, Gannett had no vision to diversify it's holdings outside of media or invest in online or other niche media like Scripps. We thought the advertiser would continue to just buy the newsprint. I hope everyone sees it is the advertiser that is struggling to decide where to spend it's rapidly declining ad budget. Most Gannett newspapers are reaching more consumers than ever before. The media landscape is fractured and the economy sucks!
ReplyDeleteThe company has no choice but to scale down. The revenue is falling quickly right now. Not one journalism solution (in the past or now) can save the company from this fall. Craig and Graia are stuck in a tough spot. If you love working in the newspaper world Gannett is a great place to work. The fall will continue for a while but the company will come out of this and grow again. I am sure it will pain Jim to write about the climb back to glory....
The Wall Street Journal asked the very question we're asking ourselves regularly in this blog on Page W1 of its Saturday edition.
ReplyDeleteThe headline: "Why No Outrage"
The drophead: "Through history, outrageous financial behavior has been met with outrage. But today Wall Street's damaging recklessness has been met with near-silence from a too-tolerant populace ... "
Here's a link to the complete story:
http://tinyurl.com/6hqjfn
Well written in my humble opinion.
Anon @ 9:25 ...
ReplyDeleteIf Gannett comes out of this and grows again as you suggest I'm certain Jim will enthusiastically write about the company's resurrection and champion the architects behind this Phoenix rising from its ashes. And the frequent readers of this blog will hold Jim accountable if he doesn't.
But lets be honest, the only thing saving Gannett right now is its free cash flow. Consider the following (none of which is encouraging for the immediate future):
- Gimme Credit analyst Dave Novosel, who has a "sell" recommendation on Gannett's debt and a "deteriorating" outlook on the company.
- Moody's Investors Service put Gannett's "A3" senior unsecured long-term debt rating on review for downgrade. Moody's concern that the company's revenue-enhancement initiatives and cost reduction actions may not be sufficient to prevent continued erosion in free cash flow over the next 12-18 months
- Standard & Poor's has already cut Gannett's rating one level lower to "BBB-plus," three notches above junk territory.
- The cost to insure Gannett's debt against a default with credit default swaps hit a record on Thursday. It rose 2.4 percent to 336 basis points, or $336,000 to insure $10 million of debt for five years, according to Markit Intraday.
(Source: Reuters)
It borders on criminal negligence for board members and the compensation committees to approve the lavish salaries and parachutes seen by Gannett executives. These parachutes will substantially reduce the stock prices in any buyout of the company, and of stockhoder compensation in the event of liquidation. Plus, they discourage investments by richer, presumably brighter business people who might bring new talents and ideas to a foundering company.
ReplyDeleteThese extravagant executive benefits are always defended with claims that they are "critical to retain" the executives. Sure. As if any of those people could go anywhere else in the world and receive more than a bare fraction of what they now receive. Gannett could slash their salaries by half, and where would they go? Who would hire them?
We the shareholders are paying for top sirloin but we're getting chopped liver.
The annual review that Gannett workers get each year states that the company rewards only "performance." Would that it apply those same standards to the top brass, who were apparently directly responsible for success back in the tall-cotton days and reaped great rewards for such, but cannot be held responsible for any of the woes that have since befallen the company.
Duh....read the proxy.
ReplyDeleteSue Clark-Johnson gets her normal retirement money upon leaving Gannett, not the numbers she "could" have earned by staying. She walks away with her retirement pay, worthless options, and a few shares of restricted stock. Hardly $19mm.