It's Just a Phase

After years of yakking, policy wonks still haven't answered this question: What the Heck Are We Going to Do With All These Baby Boomers? This issue has a bunch of workplace subtopics, including: (1) How Are We Going To Get Them To Leave Once And For All So We Can Have Their Aeron Chairs? (2) OMG, Who’s Going To Do All This Work When They’ve Gone? and (3) Hey, When Can We Get Rid of This Stupid Rule The Old People Have Against Flip-Flops in the Office Cuz That's, Like, Really Stupid?

The solution to these pressing questions, some people think, is to offer “phased retirement,” gradually reducing boomers’ hours and responsibilities as they train their successors. Sensible as this sounds, it doesn’t usually work (despite some legislative fixes), because few people can afford to phase out before their pensions fully phase in, and if they cut back their hours, their medical benefits may retire and move to Fort Lauderdale.

In Proxyland, however, phased retirement is not merely a wistful dream, but a thriving institution, though it goes by a different name -- the “post-retirement consulting arrangement.” These cushy deals for outgoing bigshots come in many varieties, and may take the form of pretend jobs or involve titles like non-executive officer or Chairman Emeritus.

But at least one company has realized that "phased retirement" has a nice ring. Taking a bold semantic step, Schlumberger (SLB) states in its proxy that it follows this practice for its executive officers. Last year, for example, it signed this contract with former CFO Jean-Marc Perraud, "phasing" him down to "senior financial advisor." Through 2010, Mr. Perraud will be working no more than half-time (and quite possibly less) at a salary of $450K, plus benefits. If all boomers could phase out like that, we wouldn’t need no freaking policy wonks, thank you.

But I don’t really want to pick on Schlumberger, a company that doesn’t use employment contracts, golden parachutes or change of control agreements, and sometimes assigns its executives high-minded performance objectives involving stuff like safety, diversity, and social responsibility. Plus which, given that its arch-rival in the oilfield services business is an outfit named Halliburton, it's going to look squeaky clean no matter what I say.

Sensitive Souls

Back in 1614, some bewigged English judge made this quotable statement: “None can create souls but God. But a corporation is created by the king; therefore a corporation can have no soul.”

Poor Nordson Corporation may be crushed to hear this. Its proxy statement, filed Friday, contains an unusual (and un-required) section entitled “Corporate Philosophy,” in which it sounds quite soulful:

“We strive to be a vital, self-renewing, worldwide organization which, within the framework of ethical behavior and enlightened citizenship, grows and produces wealth for our customers, employees, long-term shareholders and communities…We operate for the purpose of creating balanced, long-term benefits for all of our constituencies: customers, employees, long-term shareholders and communities.”

Hey, not so fast there. Citizenship? Constituencies? Do you know the law does not necessarily like it when you morph into the corporate version of Sensitive Guy?

Yes, though this may surprise some people (gosh, I hope it does, or why bother blogging) the issue here isn’t just a moral one, i.e., whether corporations should be sensitive to the needs of “stakeholders” other than their shareholders. It's also a legal one - how much does American corporate law actually allow that kind of sensitivity, and should we reform the law to encourage more of it? As a law professor said last year in a widely discussed article on corporate social responsibility, “the current debate within corporate law is as fundamental as [at] any time since the New Deal.”

Speaking of the New Deal, today’s Wall Street Journal paraphrases two economists who think the incoming recession may be “at least as bad as the five most catastrophic financial crises to hit industrialized countries since World War II.” At least. If times get hard, corporate social responsibility may become an unaffordable luxury on the one hand, or an imperative on the other. Either way, we won't have patience for debates among wig-wearing jurists about the existence or nonexistence of corporate souls, but even in a recession, certain soulless, wig-related sectors of the economy will no doubt keep chugging along.

Thinking Ahead

You never know when Greek mythology will make headlines. The founders of Cerberus Capital Management, the firm that’s taking Chrysler private, admitted they chose the name in ignorance of Cerberus’s prior life as a three-headed hellhound with the tail of a serpent. So what? It still beats lots of other corporate names we’ve come across of late: fake compound words like Idearc and CopyTele, meaningless jumbles of letters like DivX and Gensym, and mystical-sounding unwords like Eclipsys. And (sigh) Fifth Third Bancorp.

We have a new Greek-sounding best friend: Panacos Pharmaceuticals, Inc. (PANC). Panacos sounds like some sandals-wearing lyre-playing dude, but we can’t find him in Greek mythology nor locate any explanation from the company.

Anyway, Panacos just filed a nice little policy on stock option grants. When we spotted it in this week’s filings, we assumed it was penance for some horrific crime. But to our surprise Panacos isn't part of the backdating stampede, though in its proxy it did confess to an isolated stock option screwup so minor it hardly seemed worth mentioning.

In its new policy, Panacos promises to grant options only at real meetings (no unanimous written consents) and to use only meeting dates as grant dates. These are moves we’ve applauded elsewhere. The policy even tries to head off timing problems that could pop up with new employees:

“The new hire may be notified that management shall recommend to the Compensation Committee and/or the Board of Directors, as applicable, an award, but that Equity Award shall not be approved until the subsequent meeting and it shall be dated the day of the meeting."

We’re wondering how well this last part really works. Panacos is a small biotech company trying to produce a breakthrough antiviral agent; the kind of place, in other words, where people live for stock options. So it’s hard to picture employees signing on without some assurance that board approval of their options is as certain as a boob job in Beverly Hills. But we’ll give Panacos the benefit of the doubt because they’re obviously gunning for this month’s Squeaky Clean Award. (Contrast the way these guys and these guys fooled around with stock option grants for new hires.)

Pictured above is a toy Cerberus, manufactured in France and advertised as suitable for children as young as 3. If you know any Goth toddlers who keep biting the heads off their Elmo dolls, this could make a nice birthday gift.

Show and Tell

“No one knows what goes on behind closed doors,” according to a 1973 song by Charlie Rich. This was true at the time, but nowadays many Americans under a certain age feel their lives are meaningless unless they’ve starred in a personal sex video and released it on the Web for all to see. What impresses us about these folks is that when the mood strikes they somehow manage to have the camcorder ready. Apparently, in a cruel trick of nature, the gene for exhibitionism is linked to the one for remembering to charge batteries.

In boardrooms as opposed to bedrooms, the song lyric still rings true. Except for a few tantalizing glimpses during lawsuits or investigations, we don’t know how most company’s boards and committees really operate.

One company, Komag, Incorporated (KOMG), decided in its recent proxy to leave the boardroom door slightly ajar. Komag thought we should know, for example, that its Compensation Committee “receives written materials in advance…typically at least three business days prior to the meeting.” A nit, but hey, this stupid procedural stuff matters, and Komag’s disclosure of this detail makes us think the company gets this. We also learn precisely how many times certain VIPs got to hang backstage with the Comp Committee members: The Committee had 11 meetings (an unusually high number, based on our anecdotal review of lots of proxies) and the CEO joined them 4 times, the CFO 2 times and the SVP of Human Resources 8 times.

It ain't exactly exhibitionism, but the desire to reveal these unsexy details isn't in most companies' DNA.

Very sorry to have lured you into this post with sex, only to progress to the usual thrilling subjects. Next time don't be so gullible.

Ripped (Off) From the Headlines

With Anna Nicole’s burial behind us, we can all get back to whatever we were supposed to be doing this week. Oh, is today Friday? Sorry, guess it's too late for that.

I cannot fill the void left by our tragic loss of the most engrossing tabloid story since bald Britney, but here are some headlines worth noting:

SEC Takes Action On Proxy Access

Having sheepishly shuffled its feet since last September, the SEC has finally taken a firm stance on the politically loaded question of whether to let certain shareholders stick certain proposals into certain companies’ proxy statements in certain circumstances, a concept known as "proxy access." (As previously noted here, many denizens of Proxyland find this idea severely disturbing, probably because if you think of shareholder activist strategies as high school seniors, proxy access would be pictured in the yearbook as Most Likely To Succeed.)

Pressured from all sides, Chairman Cox came out decisively in favor of procrastinating for another year. He has – you guessed it - commissioned a study. And John White, head of the Division of Corporate Finance, made it official with this rousing statement on the topic:

"I don't have much more to say at this point, but understand that our goal… remains to act in time for the 2008 proxy season. "

Aliens Invade 10-K Filing

It has fallen to ace blogger Michelle Leder at Footnoted.org to prove once and for all that aliens exist and periodically take over the minds of earthlings. No other explanation can be found for the Compensation Discussion & Analysis inserted in Kinder Morgan Management, LLC’s 10-K, which Michelle quoted today:

Unlike many companies, we have no executive perquisites and, with respect to our United States-based executives, we have no supplemental executive retirement, non-qualified supplemental defined benefit/contribution, deferred compensation or split dollar life insurance programs. We have no executive company cars or executive car allowances nor do we offer or pay for financial planning services. Additionally, we do not own any corporate aircraft and we do not pay for executives to fly first class. We are currently below competitive levels for comparable companies in this area of our compensation package, however, we have no current plans to change our policy of not offering such executive benefits or perquisite programs.

I hope someone has alerted NORAD.

(p.s.: There is a remote chance aliens were not involved here. As one law professor has argued, businesses organized as publicly traded partnerships, as is Kinder Morgan, tend to be more accountable to their owners than traditional corporations.)

Lenovo Recalls Laptop Batteries, Citing Fire Risk

This has nothing whatsoever to do with corporate governance, but it has to do with me, which is more important. Upon learning that aliens really walked the earth, I dropped my ThinkPad laptop, an event that vastly increases the risk my Sony lithium-ion battery will soon explode. So if you don’t hear from me next week, you’ll know why.

Sweet Nothings

For the second day in a row, we're going to praise someone. This must not become a habit. Nothing worse than a happy blogger.

On Tuesday John Nano returned to his post as CEO and President of Competitive Technologies, Inc. (CTT). The company dumped him in June 2005 and to regain his position he had to wage a successful proxy battle and replace the entire board of directors. Gosh, if that’s what it takes to get a job these days it's going to take me longer than I thought.

Mr. Nano’s employment agreement appeared in an 8-K today. We think we like this Nano guy, and not just because he has such a cute name for a tech executive. Despite being in a pretty powerful place right now, he signed a contract (similar to his old one) that treats him less like a CEO and more like an OCE (Ordinary Corporate Employee) when it comes to grounds for firing.

So what's the magic contractual provision making us annoyingly cheerful today? To lose his severance package, Nano need not resort to embezzlement, moral turpitude or a life of crime. All it takes is “a material failure to carry out effectively Executives [sic] duties and obligations to the Company.”

That’s enough, folks, to make us jovial – a contract that lets a company kick a CEO out the door for poor performance and not make him rich in the process. Such a beautiful thing. OK, enough now. Future posts will be surly and mean-spirited.

Cutting the Cord

What is a Chief Information Officer? Apparently this is what we now call the guy who used to be called something like “Head of IT.” When I worked for a small company, the head of IT was the person who showed up to jiggle the power cord when your PC started acting weird. But last year’s top-paid CIO, Randy Mott of Hewlett- Packard, earned $10.3 million. So there must be more to the job than the jiggling.

Whatever a CIO does, Suburban Propane Partners, L.P. (SPH), a master limited partnership traded on the NYSE, has decided it doesn’t need one anymore. So it asked CIO Jeffrey Jolly to leave, eliminating his position.

Mr. Jolly left with a generous package, but Suburban showed some class here. Really. Not that I much like the deal - salary through July 2008 totaling $330,000, eligibility for full un-prorated payouts under three different bonus plans, custody of a PC and an SUV, and free tax preparation and medical coverage. (In exchange, Mr. Jolly agreed not to sue or compete with Suburban and to let the company humiliate him by repeatedly referring to him in the contract as "he/she.")

What I do like is that Suburban’s disclosure was straightforward. They laid the package out in the 8-K in an unvarnished fashion so that the actual contract, which appeared a week later in a 10-Q filing, contained no surprises. This is quite unusual: 8-K summaries of severance contracts tend to be masterpieces of fudgification.

Something else about Mr. Jolly’s deal struck me as unusual. As is customary, Jolly's promise never ever to sue his former employer for anything also binds his descendants, heirs, and executors. But in a supernatural twist, this one names his “ancestors” as well. I don’t know whether someone can contractually bind his dead relatives, such questions being the province of law professors, but I think what we have here is an anti-haunting clause.

p.s.: The company's gift of a GMC Yukon gives me an excuse to post a poem I once read on Honku, a Brooklyn-based website for haikus about road rage. I can't find it on the site any more, but here it is from memory:

Ice caps are melting.
Hope your Yukon Denali
Doubles as a boat.

Non-news Flash

Surprise, surprise. Socially responsible investment funds care about corporate governance. The Corporate Library ranked 43 fund families according to how often they voted for shareholder-sponsored resolutions on corporate governance. The top 5 were all socially responsible investment(SRI) funds. The second 5 were, in order: Goldman Sachs, TIAA-CREF, Franklin, JP Morgan, and Smith Barney. The bottom 5? State Street, Putnam, AIM, Federated and, bringing up the rear, Fidelity.