What Dubow gets if disability forces him out: $37M; payout much bigger than in traditional retirement

Gannett would pay Chairman and CEO Craig Dubow $37.1 million in disability benefits, stock awards, pension and other payments if his new health problems force him from his job permanently, according to company documents filed with federal regulators.

Dubow

Dubow, 56, is entitled to the payout under terms of his employment contract and the disability policy for senior executives, according to the annual proxy report to shareholders, which Gannett filed in March with the U.S. Securities and Exchange Commission. The payments are considerably more than what he would get, $22.5 million, if he retired voluntarily, the report says.

Dubow also would get limited use of the Corporate jet and access to a country club, the cost of which he would pay -- but at substantially lower, company-subsidized rates, the proxy report says.

The $37.1 million disability payout is outlined on Pages 45-47 of the report.

Martore

GCI announced early last night that Dubow is taking a second medical leave to deal with back and hip problems that sidelined him for four months starting in June 2009. COO Gracia Martore, who became principal executive during Dubow's last leave, will assume that job again. Martore, 60, is his likely successor when he leaves his job permanently -- although her age could become an issue.

In its statement, the company quoted lead board of directors member Duncan McFarland: "We wish Craig well during this difficult personal time. The board has confidence in Gracia and our very capable management team to run the day to day operations of the company, and we believe Gannett won't miss a beat at this important juncture."

The announcement came after stock markets closed. This morning, GCI recently traded for $10.12 a share, up 4 cents.

Length of leave unclear
Dubow has been chief executive since July 2005, and was made chairman of the board of directors a year later. Martore was promoted in February 2010 to GCI's No. 2 executive, president and chief operating officer. She had been chief financial officer since 2003, and first joined the company in 1985.

The company's announcement did not say when Dubow's medical leave would start, and did not estimate how long he might be out. It also did not say when Dubow and the board of directors first discussed this leave, leaving unanswered questions about the urgency of his medical situation.

Published reports last night quoted a GCI spokeswoman saying only that Dubow's problems stemmed from back and hip problems. He has received surgery at least twice in the past.

Since his return to work in October 2009 from his last leave, Dubow has often been seen in a wheelchair and using crutches during frequent visits to GCI worksites. He has been reported on these visits as recently as the past month.

Breakdown of $37.1M
Similar disability payouts, although in very different amounts, also are due to Martore and four other executives, the proxy says.

Here's a breakdown of the estimated payouts to Dubow:

• Pension: $12.9 million
• Stock options: $6 million
• Restricted stock units: $5.3 million
• Disability benefits: $6.9 million
• Final salary, bonus payment: $5.9 million

The proxy report does not detail the specific circumstances, nor timing, under which these benefits would be triggered for Dubow and the other five senior managers known as "named executive officers." It says only that the payments are due "if the employment of a NEO is terminated upon the executive's disability."

Board empowered to remove him
However, under the terms of Dubow's employment contract, the board of directors is empowered to remove him under circumstances where he is no longer able to perform his duties or has otherwise violated the terms of the contract.

If Dubow were to retire voluntarily, rather than via disability, he would get the much smaller $22.5 million as follows, according to Page 43 of the proxy report.

• Pension: $11.1 million
• Stock options: $6 million
• Restricted stock units: $5.3 million

The disability salary and bonus payments are spelled out this way, the proxy report says:

"Pursuant to their employment contracts, upon a termination of employment as a result of disability, Dubow and Martore would be entitled to a lump sum payment in an amount equal to two times the sum of (a) the executive’s base salary as of the date of termination (but no less than the minimum contractually provided for base salaries for Dubow and Martore, and ignoring any voluntary reduction of their salaries) and (b) the greater of (i) the amount of the executive’s annual bonus earned with respect to the year ended prior to the year of termination, or (ii) the average of the executive’s three most recent annual bonuses as of the date of termination."

In 2010, Dubow's base salary was $1.2 million, an amount he voluntarily reduced to $1 million beginning Nov. 1, 2008. His cash bonus was $1.75 million. That is the highest of his three most recent bonuses. In 2009 and 2008, his bonuses were $1.45 million and $875,000. (Table lists salary and bonus payments for all six NEOs last year.)

GCI is the largest U.S. newspaper publisher by circulation. It has nearly 100 dailies in the U.S., including USA Today, and the U.K. It also owns 23 U.S. TV stations, plus hundreds of other media businesses, employing more than 30,000 workers.

The proxy report's Page 46 details potential disability payments to Martore and the other four officers: Chief Financial Officer Paul Saleh, U.S. newspapers division President Bob Dickey, USAT President Dave Hunke, and broadcasting division President Dave Lougee.

Other non-cash disability benefits
In addition to the $37.1 million in payments, Dubow also is entitled to the same other benefits promised him if he left via a conventional retirement, the report says, in footnotes on Page 44 and 47. They include:

• Supplemental medical insurance coverage that extends to his family, plus a Medicare supplement and reimbursement for the cost of Medicare Part B coverage, beginning at age 65 and continuing for life.
• Legal and financial counseling services on the same basis as available to an active executive at the time his employment terminates, for three years after his employment terminates, at an estimated incremental cost to the company of approximately $25,000 annually.
• Use of company aircraft "for three years after his employment terminates, at times not inconveniencing the company, the cost of which would be reimbursed by Mr. Dubow at the company’s then-effective incremental hourly rate."
• Ownership of existing home office equipment would be transferred to him.
• Home computer assistance, for three years after his employment terminates.
• Use of an office, secretarial assistance and access to company facilities at no charge for three years after his employment terminates.
• Access, for three years after his employment terminates, to "one country club selected by Mr. Dubow of which the company is a member at the time of his retirement and to which Mr. Dubow had access during the time of his employment, the usage cost of which would be paid by Mr. Dubow." 

These post-retirement perquisites would terminate, the footnotes says, in the event Dubow provides competitive services to a competitor of the company, as described in his employment contract. Corporate estimates the annual incremental costs to the company associated with these perqs of about $50,000.