Thursday, October 12, 2006

Dog Days

Ferrellgas Partners, L.P. (FGP), which sells propane for backyard barbecues, just had a fire sale on "change of control" agreements. It’s a group hug: Nine senior execs listed in the 10-K, nine agreements.

As Michelle Leder’s excellent Footnoted blog frequently observes, an executive’s sudden urge to sign this kind of contract – which ensures payments if he happens to lose his job in a merger - is often followed by (surprise!) a merger. Here at Proxyland, we stay out of the prediction business; that kind of thing could result in income, which would be far too jarring to our psyche.

The payoff here isn’t huge: President and Chief Operating Officer Stephen Wambold, for example, would get two years' salary, two years' bonus, and two years of medical coverage. (The other eight guys – yes, they’re all guys - probably get the same, but you’re sniffing propane if you think I’m going to read nine contracts.)

Under the contract, there are three ways Wambold could forfeit his post-merger reward:

1. Act like Bartleby the Scrivener: (“willful and continued failure…to substantially perform his duties…after a written demand” by the board)

2. Become an evildoer: (“willful engaging… in conduct which is demonstrably and materially injurious to the company")


3. Completely f**ing lose it: (“egregious misconduct involving serious moral turpitude”).

Even in Proxyland, these are rather low standards. Were this an employment contract, I would have to get all self-righteous on Ferrellgas's ass. This setup is slightly less offensive in a change of control agreement, which functions as a kind of guarantee. Sure, I'd rather they just came out and said: “Listen, if my job goes away in a merger I get this money NO MATTER WHAT.” But then people might understand what's going on, which would ruin the fun.

Wambold is signing a prenuptial agreement: OK, I’ll marry you, but if it doesn’t work out I get two years of alimony. No matter what.

Ah, two years of lazing in the backyard. I can smell those propane-roasted hot dogs already.