Tuesday, October 02, 2007


I've been wandering through Proxyland for a long time now, but I'm still awed by what a special place it is. For instance, where else would you find the kind of forgiveness demonstrated in the "termination for cause" section of John Tyson’s new "employment” contract with Tyson Foods(TSN)? (I posted about other aspects of this contract earlier today at Footnoted.)

Per his contract, firing Mr. Tyson for cause would take some pretty bad behavior. He'd have to commit “willful malfeasance or misconduct,” act with "gross negligence," breach the contract willfully or be convicted of a felony. Felonies aside, the legal upshot of these fancy words is that he’d have to act with a conscious intention to do something wrong, or show reckless disregard for the consequences of his behavior. (I’m oversimplifying here, so my apologies to anyone who would prefer to read a thousand-page treatise.)

But the quality of mercy is not strained in some corners of corporate America. Before the company could boot him, Mr. Tyson would get a chance to “cure” what he’s done. In other words, if he cleans up whatever mess he’s made, even willful and reckless behavior may be forgiven.

Similar kindness crops up in another deal Michelle Leder recently wrote about at Footnoted: President Richard Wohl’s yummy contract with Indymac Bank (whose publicly traded holding company is Indymac Bancorp, Inc. (IMB)). Mr. Wohl may be able to avoid certain types of terminations for cause by curing his misconduct, even he acted "in bad faith.”

Me, I don’t think I’d want to keep some reckless wrongdoer hanging around the office, even if he says he’s very sorry. But I'm seeing lots of these cure-all clauses, so many companies are promising to keep loving (and paying) the sinner if he or she makes amends for the sin.


Jack Payne said...

Forgiveness by benevolent boards in corporate America seems to be the politically corrent way to go these days. Even with scalping in proxies coming on strong as the next great fraud on shareholders, corporate boards appear to be unaware.

I write extensively on con men and their schemes, scams, and frauds, and see this (along with the hustling of "Historical Bonds") as the next big scandal in waiting.

Anonymous said...

Well, I'm a CEO and I have similar language in my contract as Tyson. It's the only defense I have against a board who might just wake up one day and fire away.