Thursday, May 05, 2011

For some directors, Gannett's stock is a bad bet

In a bitter irony, top management isn't the only group shying away from Gannett's stock: Only two of the nine independent members of the board of directors last year elected to get paid entirely in GCI shares.

The rest? Not so much.

Karen Hastie Williams, who retired from the board this week, got paid $170,827 in 2010. Yet, she elected to receive only 19% in stock, according to the annual proxy report to shareholders. Marjorie Magner? Of her $117,160 in pay, she took just 37% in shares. (Full details in table, below.)

The fewer shares a director accepts, the less confident they appear about the company's fortunes. That's an odd perception to create, given the fact directors first and foremost represent the interests of the stockholders.

Half Dubow's pay in stock
Top executives also have moved away from shares. Starting in 2008, the board no longer required they take any of their annual bonuses in stock.

To be sure, the highest-paid executives still get paid large sums in stock. Chairman and CEO Craig Dubow, for example, was paid $9.4 million last year. Of that, 54% was in stock. (As the lone employee on the board, Dubow doesn't get paid a separate director fee.)

Under their rules, directors are required to accept only a portion of their annual fees in stock: 2,000 restricted shares, or 8,000 riskier stock options. These awards are given on the first day of the directors' compensation year, which starts with the annual meeting; this year, that was held on Tuesday.

Director Louis an exception
It's no wonder directors and management are skittish about GCI stock. Shares closed today at $15.24, down 40 cents, or 6.4% lower than a year ago. Compare that to the S&P 500 index, a widely watched measure of overall stock activity that's jumped 14% from a year ago.

Directors can choose to be paid entirely in shares. That was the case last year for Arthur Harper and John Louis.

In Louis' case, at least, it appears that for 2011, he once more is opting mostly or entirely for stock, according to a series of filings Corporate made today with the U.S. Securities and Exchange Commission.

Overall director pay varies based on committee assignments; meeting attendance, and the mix of cash and stock they receive. Those electing for more stock earn more in the long run, assuming shares perform as forecast. That is because they are taking on more risk -- the same risk that all stockholders take when investing in the company.

To be sure, no regular employee would be expected to get paid entirely in shares; that would violate a basic rule of diversification: You don't invest everything in your employer. But as at all publicly held companies, GCI's directors are part-timers, and have other sources of income. It's entirely reasonable for them to bet fully with the house.


  1. It's encouraging to see that at least 5 of the current board take greater than 50% in stock. That really is the best indicator of whether a member is truly invested in the company and thus willing to make the hard choices a board needs to make. If the stock continues to slide, let's all hope that Louis and Harper finally pull the trigger on a long overdue management team makeover.

  2. The only triggers any gannets directors will be pulling are those on their toy guns. These guys are just sandboxes. How else could they be hoodwinked by craig and his merry band of morons.

  3. I had always felt that it was a matter of loyalty and faith as an employee to invest in my employer's stock. Gannett. Then again, I thought it should be part of one's job description in whatever capacity to read the product every day.

    Then I saw the managers and supervisors dumping their stock. Then department heads. But I still never saw anyone reading the product.


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