Monday, March 23, 2009

Top bonuses: In shift, now 100% cash -- no stock

In a major revision to executive pay policy, Gannett's board of directors no longer requires CEO Craig Dubow and the other five highest-paid executives to take annual bonuses at least 25% in stock -- showing even the board is pulling support from GCI shares.

The switch took place with the $2 million in bonuses just paid for 2008, and was quietly disclosed in the new proxy report to stockholders issued last week.

The four-member executive compensation committee setting pay for Dubow (left) said the change came because "most executives have substantially met" the 25% threshold, the report says. The directors did not identify any of the five "named executive officers" (NEOs) who had not completely met the requirement.

The report strongly suggests a more likely explanation, however. Directors wanted to offset The 11th Floor's enormous paper stock losses, 79% last year alone -- a decision that defeats the very intent of those original stock incentives.

"None of the stock options our NEOs received during the last eight years currently have any value,'' the committee said in last week's report. Meanwhile, directors said, the restricted stock units (RSUs) the board gave to the executives since 2005 "have experienced a decline in value the Committee did not and could not anticipate."

The pay policy change emerged today as Gannett disclosed it had frozen wages for the coming year, and ordered a second round of unpaid furloughs for tens of thousands of U.S. workers.

Proxies show policy change
Following are screenshots from the two most recent proxy reports with the U.S. Securities and Exchange Commission, showing the cash/stock mandate in 2008 -- followed by its omission from this year's filing.

2008: CEO Craig Dubow and Gannett's other five top-earning executives were paid bonuses in cash and stock, that year's proxy report to stockholders said (detail, above). This was to "promote ownership,'' the committee said: "We are committed to fostering a compensation structure that aligns our executives' interests with those of our shareholders. For example, 25% of annual bonuses are paid in the form of Gannett stock, which may not be sold for six months from the acquisition date. In addition, we expect our NEOs to increase their stock ownership until they reach a guideline amount of five times their base salary midpoint."

[2009 omitted: 'payable 75% in cash and 25% in stock']

This year:
Dubow and the other five highest-paid could take their bonuses 100% in cash, the proxy says, citing the committee's new principles: "Since most executives have substantially met their stock ownership guidelines, the Committee no longer requires 25% of an executive’s bonus to be paid in the form of Company stock."

The four compensation committee members; from top, left to right: Arthur Harper; Marjorie Magner; committee Chairman Duncan McFarland, and Karen Hastie Williams.

Board: investors 'deeply disappointed'
Following is from the "executive incentive bonuses'' section in this year's proxy report; it starts on page 23. (Quick glossary: NEOs are Gannett's five top-paid employees known as named executive officers. RSUs are a gift of company shares called, restricted stock units.)

"Our Company’s stock price performance in 2008 deeply disappointed all of our shareholders, the Board and management included. Each Company director saw his or her investment in Company stock fall dramatically in 2008. Each member of Company management, including each NEO, was personally and significantly impacted by the decline in our stock price."

The text continues: "As a result of a combination of the Committee’s executive compensation policies -- paying a substantial portion of NEO compensation in the form of Company stock, paying 25% of NEO bonuses in past years in the form of Company stock, and through stock ownership guidelines requiring each NEO to retain Company stock notwithstanding the decline in stock price -- each NEO has a large percentage of his or her personal net worth tied to our Company’s stock price. None of the stock options our NEOs received during the last eight years currently have any value. The RSUs our NEOs received since 2005 have experienced a decline in value the Committee did not and could not anticipate when those awards were made."

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  1. This is unfuckingbelievable. Their audacity is surpassed only by their incompetence.

    Best case, these criminals should be in jail.

  2. They promised the DIG would get us out of this mess.


    Then it was graphics! God, we need to hire more graphics people because we need flashier newspapers with gigantic pictures of things on our front pages! Fewer words! This will bring our readers back!


    Then it was flash animation. That will surely drive eyeballs to our Web sites! We need more flash animation to get young readers interested in our content!


    Next, it was updates to the websites. That will fix things. Every site must have fresh updates on the web every five minutes! It doesn't matter if we don't know anything about whether those kids actually set up the lemonade stand. Just put it on the web! Now! Hurry!


    Then it was blogs. Blogs! Glorious blogs! Oh dear Dog, everybody, including your dog, should write a blog! That is what our readers craaaaaave!


    Then it was video. Everything has to have video. Any ol' crappy video! I don't care about the story... does it have video? You have to have video. Get back out there and get us some more video!


    Suddenly, it's twitter. Everybody has to set up twitter. Even if you hate twitter, you have to use twitter. I don't care if you break out into hives because you use twitter, you have to use it! Our readers are using it. That's what we've been missing! If only we had been using twitter!


    What's next? ContentOne?

    Ripple 6?

    Fail. And, yeah. That would be another Fail.

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  4. The irony is that this probably would have been a good year to force the NEOs to take 25% of the bonus in stock. Unless the board believed that the stock could go below $2, thus rendering that portion of the bonus worthless?

    If Dickey was forced to take 25% of his $360,000 ($36,000 per month) in stock, that would be $90,000. If the stock goes to $6, now his bonus leaps to $540,000.

    If the logic was because of sympathy that NEOs had lost a significant portion of their bonuses over the past several years due to the decline in the stock price, this is in fact very defeating. One could argue that the performance of the company (and yes, the stock price) is a direct result of these leaders' decisions.

    If their decisions had nothing to do with the performance of the company, good or bad, then obviously, one could make the argument that these "leaders" are not needed.

    Indeed, if they never came back to work after the next furlough week (or two), would anyone notice? Would the company make or lose any more money?

    The high pay and self-important perks (car allowances, parking spaces, GF matching funds, company plane, etc.) should be enough. But even in an off year, with no clear vision about where to take the company over the next 24 months, the BOD gives them even more money.

    If the bar has been set here, Craig should be able to make $100 million in bonus if the company actually does something right.


  5. GCI paid Dickey $4,471.70 per work day in 2008 based on his hire date of 2/27/08. Total take $948,000 for the 10 months... unless his prior role salary is included.

  6. "Indeed, if they never came back to work after the next furlough week (or two), would anyone notice?"

    They'll notice if we don't show up on Wed.

    Blue Flu!

  7. "...experienced a decline in value the Committee did not and could not anticipate."

    Really? I've been hearing about the coming decline of the industry for almost as long as I've been in the industry, and I'm a nobody. Don't they ever read the paper?

    Oh. Right.

  8. This is really amazing. When the execs cash in their stock and options for huge profits, the logic is that they earned it because of their leadership.

    Now, when the stock tanks and the options are worthless, the logic is that we have to compensate the execs because it's not their fault.

    Heads I win, tails you lose. The story of the executive class in modern America.

    It's like the classic definition of chutzpah: the boy who kills his parents, then asks the court for mercy because he's an orphan.

  9. Frankly, this company's biggest problems lie in its lack of character and that it operates as if it were truly morally bankrupt.

    Paying top leader’s bonuses at all, let alone in cash is yet another example - especially given the repeated hits that employees and this company’s products continue to take.

  10. 10:10 pm nails it: Many of the worker bees anticipated the falling stock price. We saw management was headed nowhere, and sold our Gannett shares in our 401(k) as fast as Corporate paid them as the company match.

    I did that every year since early 2004, when Gannett was trading in the low $90s. During the following four years, until I took my January 2008 buyout, Gannett was BUYING GCI stock during those ill-conceived $1.8 billion in buybacks that the board of directors OK'd.

    So, to recap: the board couldn't conceive of the stock's decline -- indeed, thought the stock was going back up -- even when we supposed dopes were selling our shares back to them high.

    Thank you, Karen Hastie Williams, for your continued, sterling financial acumen. You earned your $167,000-plus in Gannett director fees last year. Not.

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  13. Jim, what will it take to throw the bums out from Dubow down to the board? Any advice?

  14. 9:30 am: Major shareholders would need to find a way to force the board to adopt a new plan that would drive up the stock price.

    Any such plan would probably involve asset sales -- newspapers, TV stations, etc. -- but that requires an improvement in the economy, such that credit markets open enough for investors to borrow again.

    Then, at that point, investors could force the board's hand -- but I can't imagine anything else happening before then.


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