17. February 2011 09:12
Let’s take a closer look at the disclosures related to executive compensation in the Compensation Discussion & Analysis (CD&A) section of Quiksilver’s recent proxy statement, filed February 9, 2011 for its upcoming annual meeting on March 22, 2011. Some of the key highlights are as follows:
- The compensation committee did not use a compensation consultant or any professional third party consulting services for fiscal year 2010 to evaluate their executive compensation programs.
- Annual Base Salary: Philosophy is to pay a base salary that is at or above the midpoint of the applicable salary range for "similarly situated" companies; the compensation committee has not identified a specific or consistent group of companies that is similarly situated.
- Annual Discretionary Cash Bonus: This is paid out based on financial and operating performance, as well as the executive officer’s individual performance in the prior fiscal year. Quiksilver recently announced that it adopted a formal incentive cash bonus plan. The compensation committee intends to establish specific financial targets and personal objectives for each named executive officer under this plan with respect to the 2011 fiscal year; a Form 8-K was also filed in this regard.
- Long Term Incentive Plan (LTIP): The LTIP pays a percentage of base salary based on EPS growth with a maximum of 200% of the salary. There were no payments for the fiscal year ending October 2010. The board has no plans to issue new awards and it currently has no awards outstanding.
- Equity Based Compensation: Quiksilver has a Discretionary Stock Option Grant and Restricted Stock Program. Although discretionary, it restricts the administrators from being able to set the grant date price lower than the fair market value of stock on the day of grant. Grant size and vesting triggers are completely discretionary.There were no grants of restricted stock made to an executive in the fiscal year 2010.
- Perquisites: This includes health and group term life insurance benefits, supplemental long-term disability benefits, 401(k) matching, and a clothing allowance. The committee eliminated a component of the COO's expatriate allowance, which previously provided him with a monthly stipend to cover educational and other general cost-of-living expenses.
- Severance/Change in Control: Each named executive officer has an agreement in place for five possible termination scenarios: with cause, without cause, good reason, retirement, and change in control. The Golden Parachute 280G excise taxes are not triggered based on these agreements.
Compared with the prior year filing, the severance agreement reported this year increased significantly (i.e., from 80%, up to 148%). The two images below are tables summarizing the current and prior year severance.
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Click to enlarge chart
After highlighting these disclosures, it is worth reviewing the company’s overall stock price history.
Stock Price History:
It appears Quiksilver has been struggling for the past two years. In the event they are a possible target for acquisition, perhaps this can explain the severance agreements being adjust proactively. For additional information, see a Wall Street Journal article by Brendan Conway as well as a Seekingalpha.com article by Brian Sozzi.