Why does Journal Communications CEO Steven Smith have an employment contract that runs through April 2016?
The Brawler is not attacking Smith, but he would suggest that 9 year contracts for executives are a bit unusual. It's probably at least twice the average length of a CEO's contract in this day and age. It's also interesting that the latest proxy lists Smith's age as 56. So he'll be 65 when the contract expires.
Is Journal protecting itself from a headhunter calling Smith on his 63rd birthday?
From the proxy:
Employment Agreement with Mr. Smith. We maintain an employment agreement with Mr. Smith, our Chairman and Chief Executive Officer, which was in place during 2006 and amended in January 2007. Pursuant to his employment agreement, Mr. Smith is entitled to an annual base salary of not less than his current base salary, as increased from time to time, and he is entitled to participate in all short-term and long-term incentive compensation plans, and savings, retirement and welfare plans and programs offered by us to our senior executives from time to time. Mr. Smith’s annual and long-term incentive target opportunities are required to be equal to or higher than the target opportunities set for other senior executive officers. The term of Mr. Smith’s employment agreement will expire on April 10, 2016.
This part also was rich:
However, if a change of control of the company occurs within two years prior to the expiration of the term of the employment agreement, the term will be extended for a period of two years following the date of the change in control.
If there was a change in control -- ie Journal was bought -- when Smith hits 64, why does he need to stick around for two more years under a new regime? Whose interest is being served?
The Brawler also neglected to include this part in his previous discussion of management's golden parachutes:
Employment Agreement with Mr. Smith. As mentioned in the Compensation Discussion and Analysis beginning on page 14 of this Proxy Statement, on January 29, 2007, we amended the existing employment agreement with Mr. Smith. The employment agreement provides benefits to Mr. Smith in the event of his termination of employment under certain conditions. The amount of the benefits varies depending on the reason for the termination, as explained below. ...
Termination without Cause; Resignation for Good Reason. If Mr. Smith’s employment is terminated by us without cause or if he resigns for good reason, then in addition to accrued salary, he will be entitled to a prorata target annual bonus for the year of termination and a severance payment equal to three times his then-current annual salary and target annual bonus. In addition, all of Mr. Smith’s outstanding equity awards will vest as of the date of termination, and we will continue to provide him with group health coverage for a period of 36 months.
If a change in control occurs, for the following two years, Mr. Smith’s target annual bonus opportunity will be no less than it was for the last full fiscal year prior to the change in control. Also, in the event of a change in control (other than a management-led buy-out or similar transaction in which Mr. Smith or a group of which he is a member participates as an acquiror), Mr. Smith may terminate his employment for any reason during the 30-day period immediately following the six-month anniversary of the change in control and receive the severance benefits provided by the employment agreement as if he had terminated for good reason, as described above.
Not bad work if you can get it: hang on for 210 days after a deal goes through, quit, and walk away with millions.
Who says you can't get rich in journalism?Here's a link to a link to the proxy.