Over the years, we’ve picked on Ralph Lauren (RL) a bit as we’ve found various examples of excess in the company’s filings. (See here for a car valued at $67,500 that was transferred to Ralph Lauren’s brother). And that’s just one example. Pretty much every one of their proxies has had a few pearls worth poking at (see here for one we found all the way back in 2006).

Like a number of public companies that have evolved from personal brands (Martha Stewart (MSO) and Steve Madden (SHOO), which Sonya footnoted last month are two that come immediately to mind), there’s a certain amount of — how can we put this politely? — co-mingling between the personal and the corporate that strikes us as a bit incestuous, not to mention downright tacky.

Despite this, Ralph Lauren stock has been on something of a tear, rising over 35% over the past year. That kind of performance often prompts investors to turn the other cheek when it comes to the type of largesse we’ve documented at the company over the years.

Until now, that is. In the 10-Q that Ralph Lauren filed earlier this week, it noted that the City Pension Fund for Firefighters and Police in Pembroke Pines, Fl. (motto: to Protect and Serve Your Retirement) has filed a suit in New York State Supreme Court against the company’s directors and certain executives for “waste of corporate assets by the Company’s directors for permitting excessive compensation to, and alleged related party transactions with, the Company’s Chairman and Chief Executive Officer and certain other executives, and unjust enrichment by these executives”. The filing goes on to note that:

The Plaintiff seeks damages on behalf of the Company in an unspecified amount sustained from the alleged breaches of fiduciary duty and waste of corporate assets and seeks disgorgement of excessive compensation and benefits of related party transactions. The Plaintiff also demands it be awarded the costs and disbursements of the derivative action, including reasonable attorneys’ fees.

The lawsuit was filed in November and was picked up at the time by Courthouse News Service, which monitors courts for news-worthy suits. But this is the first time that this is appearing in any of Ralph Lauren’s filings. In the 10-Q, the company doesn’t give an estimate for damages and says the company and the defendants sought dismissal of the case on Jan. 12.

While there’s no discussion in the filing on who’s footing the bill for fighting this lawsuit, the company does note in a different section of the filing that its SG&A expenses climbed by over 15%. While legal fees are not specifically broken down, the filing does make clear that they’re included in this number.

Given the heady performance of the stock, other investors may be more than happy to sit on the sidelines and see whether the Florida firemen and police or the Bronx prepster ultimately prevail.

Image source: firefighter via Shutterstock

Over at footnotedPro, we’ve put out four reports in the past week.  We’re at the beginning of filing season and the actionable disclosures are coming in fast and furious. For more information or to inquire about a trial subscription, email Todd Serpico. Find out what you’re missing in the filings.

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AmerisourceBergen (ABC) is one of those companies in your life that you may never have heard of: It distributes prescription and over-the-counter drugs, brand names and generics, home health-care supplies and much, much more. It’s big — the company’s market-cap is over $10 billion, and its revenues in the fiscal year that ended September 30 were more than $80 billion.

But the company caught our attention this week because its directors decided to give themselves a big raise, as laid out in an exhibit to the 10-Q the company filed on Tuesday morning. It seems to be that time of year: We’ve been seeing a number of boards giving themselves big payouts of various kinds, including the recent decision at Google (GOOG) to double director stock grants.

Until January 1 this year, non-employee directors at AmerisourceBergen got a modest annual cash retainer of $60,000. That’s now jumped to $100,000 — a 67% cash raise (though directors may opt to take 50% or more of it in equity). Chairman Richard C. Gozon will get $150,000 instead of the $90,000 he was getting, also a 67% bump.

Meantime, the board decided to give one another an annual equity award of $125,000, payable in either restricted stock or restricted stock units, as the mood strikes each director. That’s up 25% from an annual grant of $100,000 in stock options.

There’s a little give-and-take involved as well. For example, last month’s proxy says directors are eligible for an initial grant of $50,000 restricted stock units on first taking a board seat; that is no longer mentioned in the new arrangement. But then, the new retainer and equity grant make up the difference in less than a year — and for sitting directors, the change is more or less irrelevant.

The new arrangement also appears to eliminate a variety of per-meeting fees; previously, directors got $3,000 for each in-person board meeting attended ($7,500 for the board chairman), and $1,500 for each committee meeting, with half that much paid out for conference calls. Committee chairs got between $3,000 (for the governance and nominating committee) and $5,000 (for the audit and corporate responsibility and the compensation and succession planning committees) per meeting, also cut to 50% for a “telephonic meeting.”

So under the old pay arrangements, the board’s five meetings in fiscal 2011 meant up to $15,000 more for each director and $37,500 more for the board chairman, assuming 100% attendance and all in-person gatherings. The compensation committee met six times — an extra $30,000 for the chairman and $9,000 for each committee member, again, assuming in-person meetings and perfect attendance. The Audit Committee met 12 times — $60,000 more for the chairman and $18,000 for the committee members.

On that front, pay will come down a smidgen: The audit-committee chair will get an extra $20,000 a year instead of per-meeting payments; the comp-committee chair will get an extra $15,000 a year; and the governance and finance committee chairs will get $10,000 each.

Relative to some of the board pay we’ve seen, these may sound like picayune numbers, but they add up. Last year, AmerisourceBergen’s directors each wound up taking home $200,000 or more once you factor in stock, options and perks. (OK, technically, one director made just $199,002.) The total tab was $1.76 million, for at most a couple dozen meetings. We’re pretty sure the new rules will increase that figure, but we’ll have to wait until the company’s next proxy, early next year, to be sure.

Meantime, AmerisourceBergen directors continue to get one benefit that’s increasingly valuable in today’s world: 100% company-paid coverage of all prescription drugs, not only for the directors themselves, but for their spouses and any children under age 26. Only one director used this benefit last year, to judge from the proxy: Charles H. Cotros, and it’s hard to figure out just what it cost, given that it’s wrapped up in a $17,586 “other compensation” figure that also includes dividends paid on restricted shares.

As for AmerisourceBergen’s shareholders, it’s hard to tell how happy they might be with the change. The company did eke out a minimal gain over the medical distribution business, to judge from total-return figures on Morningstar.com, but it was small, at 1.2 percentage points. More recently, it’s been trailing its peers, however, so we’ll see how things look in a little over a year, when the board’s 2012 pay is added up in its proxy.

Image source: Money Meeting image via Shutterstock.com

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Employment agreements are like cooking – a combination of science and art that result in a dish that some may find tasty (executives) while others (perhaps investors) find a little harder to swallow.

Consider, for example, the new Amended Employment Agreement that Coventry Health Care, Inc. (CVH) just gave to its chief executive, Allen F. Wise; the agreement was filed with the SEC along with this 8-K on February 6. The agreement extends Wise’s job through December 31, 2013 and creates the possibility that he could be more than $15 million wealthier by the time the agreement ends.

Wise has a long history with Coventry. He joined the company’s board of directors in 1996 and served as president and CEO from October 1996 to December 2004, when he retired. Following that move, he was named Chairman of the Board in January, 2005. But within a few years, Coventry’s stock price fell by 75%, prompting the man who succeeded Wise as chief executive, Dale Wolf, to resign suddenly. Coventry’s directors asked Wise to come back and in January, 2009, he resumed his former role.

When Wise started his second stint as CEO, his 2009 employment agreement provided for some nice touches – a signing bonus worth $5.5 million, 300,000 Performance Share Units (PSUs), and 1 million stock options – in addition to a salary of $600,000 per year. The company explained in its April, 2011 proxy that it

“…equalized base salaries for certain named executive officers to $600,000 to foster a sense of teamwork. Our management team is highly collaborative, and each member of the team is expected to be fully engaged in all aspects of our business.”

Perhaps that sense of teamwork is firmly established, or maybe it’s just not so important anymore, because Wise’s new agreement raised his base salary to $900,000 a year. But, as before, he also got some forms of compensation that are worth far more than his paycheck.

Last month, Coventry gave Wise a batch of Restricted Stock Units (RSUs) and PSUs with a grant-date value of $7.6 million. Whether the RSUs will vest depends on Coventry meeting its earnings per share target in 2012; if it does so, they will vest, half at the end of 2012, and half at the end of 2013. The PSUs, meanwhile, will vest if certain EPS and revenue growth targets are met. Both types of equity awards will be settled in cash, and Wise will get his money in early 2014.

Wise’s new employment agreement also promises to make a second $7.6 million award in January, 2013. While the vesting criteria are similar (but tied to targets for 2013), Coventry once again promised to settle things at the end of that year and pay Wise in cash in mid-February, 2014.

Judging from this morning’s earnings report, Wise seems determined to charge ahead, making reference to Coventry’s “forecast of double digit revenue growth coupled with operating earnings and EPS growth.” But, of course, there is still much work to do. Coventry’s performance in the past year lagged behind both the S&P 500 and other companies in the health care plan industry. If the company’s performance improves dramatically, we suspect that investors may find Wise’s employment agreement more palatable than they currently do.

Image source: Chopping the vegetables via Shutterstock

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Filings season is fast approaching. At footnotedPro, we spot red flags and hidden opportunities well in advance of the market. To inquire about a trial subscription, or about our report on our top takeover targets for 2012, please contact Todd Serpico.

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Eugene M. Isenberg is getting a lot of attention — and deservedly so — for giving up the $100 million that his employer, Nabors Industries (NBR), owed him for naming another man chief executive of the company Isenberg had run for a quarter-century.

That give-back is remarkable, as with most things involving Isenberg, Nabors and compensation. But there are a few details that have been mostly overlooked in the coverage, including what could prove to be years of gainful employment for Isenberg and lifetime health-care for him and his wife. It doesn’t begin to add up to what he’s giving up, but it’s instructive nonetheless.

Isenberg, of course, has made a ton of money in his years running Nabors. From 2008 to 2010 alone, his total compensation came to nearly $109 million, almost all of it in cash, according to the company’s most recent proxy, filed in late April. His flat $100-million severance deal — triggered when the company named then-Chief Operating Officer Anthony G. Petrello to replace him as CEO in October, even as he stayed on as chairman — was a replacement for a richer, $264-million arrangement that triggered shareholder objections after it came to light. (The Wall Street Journal’s Mark Maremont laid out the whole scenario in a piece last fall.)

Now, even that scaled-back (but still remarkable) payout is gone, as is $7 million in a “deferred bonus” account. The 8-K that Nabors filed yesterday makes clear that it is being replaced by a kind of $6.6 million posthumous bequest to Isenberg’s heirs — the money will be put in escrow at a healthy 6% fixed interest until the 82-year-old Isenberg’s death. (He also gets that lifetime health-care, plus dental coverage and life insurance.) Another piece from Maremont and colleague Joann Lublin in the WSJ indicates that Isenberg would like the company to give a “substantial portion” of what he surrendered to charity; the company apparently plans to make a donation, but not anything like the full $100 million.

But the new agreement with Isenberg also has another provision that caught our attention: An indefinite post with the company at an estimated $50,000 a year, or more. Here’s the official language from the 8-K, which is simpler than the agreement itself:

“Mr. Isenberg will continue as Chairman of the Board, but will not stand for reelection as a director when his term expires in June 2012; at that time, he will be appointed Chairman Emeritus for a three-year term, which will be extended for additional one-year terms unless terminated by him or by the Company, and receive cash compensation equal to other nonemployee directors…”

Nabors’ most recent proxy shows that directors get a base cash retainer of $50,000 a year, plus extra for chairmen and those in other key roles; total pay for directors, including equity, ranged from $280,000 to more than $526,000 in 2010 — very much on the high end of what we tend to see. The automatic extender means that Isenberg is likely to keep the job until he doesn’t want it any more.

What isn’t said explicitly in the 8-K, but is spelled out in the agreement itself, is that the board could bump that amount up by as much or as little as it sees fit:

“In the sole discretion of the Board of Directors of Nabors Bermuda, for serving as Chairman Emeritus and a goodwill ambassador, Executive may receive additional compensation and benefits.”

Unfortunately, we may never find out what the board sees as appropriate. Once top executives lose their august titles, they tend to disappear from proxy filings, and it isn’t clear whether Isenberg’s “chairman emeritus” title will be a true board seat — in which case his pay will show up with that of other directors — or whether it’s a largely honorary title.

We think it’s unlikely that the board is going to return Isenberg to anything like the eight-figure pay packages he’s been accustomed to. Still, an indefinite contract for an indefinite amount of money is a pretty big question-mark. Given Nabors’ past pay practices — at least until someone kicks up a fuss — it’s one worth keeping an eye on.

Image source: Money via Shutterstock.com

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After Hewlett-Packard (HPQ) filed its proxy on Friday, news organizations from coast to coast published articles about the compensation that CEO Meg Whitman and the other top executives received last year (see here and here).

Each exec got a total compensation package of $9 million or more; and we noticed that former chief executive Léo Apotheker got $30.4 million – a number respectably in the middle of our prior estimate of what he would walk away with. (See our post on the Worst Footnote of 2011 for details.) And yet (other than a nod in passing from CNNMoney here) another well-paid leader at HP largely escaped the compensation klieg lights.

That person is the executive chairman, Raymond J. Lane, who received equity awards and a little cash in fiscal 2011 that added up to nearly $10.65 million. Lane started out as simply a director, but his role quickly evolved into much more than that. His pay followed suit.

To provide a little context on Lane’s compensation, let’s first consider the fact that Lane’s fellow directors made between $290,676 and $355,868, if they served a full year. Each got an annual $100,000 cash retainer (or an equivalent amount in shares, if they preferred) and an annual $175,000 equity retainer. Directors got $2,000 more for each board meeting or committee meeting they attended in excess of six, and committee chairs got more cash for their extra work.

As stated, Lane started out as a director. So how, and when, did he end up getting so much more than his fellow directors? Lane was elected to the board on September 30, 2010, and later tapped to be the non-executive Chairman of the Board on November 1 of the same year. At the time, the board awarded him 45,000 RSUs that would vest equally over three years, starting with the first anniversary of the grant, so long as he remained in that position. The proxy then notes:

“No other compensation was paid to Mr. Lane for his service on the Board from November 1, 2010 until the 2010-2011 Board term ended on March 23, 2011. For the remainder of fiscal 2011, Mr. Lane received the same compensation paid to other non-employee directors.”

On September 22, 2011, Lane’s title changed to executive Chairman of the Board, and — in addition to the change in title — the board gave him an equity retainer in the form of a non-qualified option to purchase 1,000,000 shares of HP common stock. The award vests according to a fairly complicated formula (p. 28, if you’re interested), but the gist is that he gets 200,000 over three years just for keeping the executive chairman’s title, another 400,000 over three years if Lane stays in the job and HP’s share price “has met or exceeded 120% of the exercise price of the option for at least 20 consecutive trading days”, and the final 400,000 if he stays even longer and the stock prices stays at 140% of his option price for at least 20 consecutive trading days.

Perhaps HP’s board has learned its lesson from the Léo Apotheker chapter, whose departure forced the company to pay out tens of millions of dollars for a short-term chief executive. Whether Lane ultimately receives the full value of the $10.65 million award depends on him both sticking around and helping to turn around HP’s stock price, which is currently trading almost 40% lower than it did one year ago. For investors, some stability and share-price gains would no doubt be welcome changes.

Image source: Bulb mark on blackboard, via Shutterstock

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Filings season is fast approaching. At footnotedPro, we spot red flags and hidden opportunities well in advance of the market. To inquire about a trial subscription, or about our report on our top takeover targets for 2012, please contact Todd Serpico.

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Game day is almost here, and thanks to the Super Bowl advertising sweepstakes, the event is probably as big a deal for corporate America as it is for sports fans. But a stroll through companies’ public disclosures shows that the Super Bowl looms large for executives and companies in other ways as well.

Television networks and station owners, of course, are full of references to the big game, either because they scored big with advertising sales in years when they carried it, or because they’re missing revenues from previous years in which they did. And for other reasons: As of last November, CBS (CBSA) was still disclosing the impact of Janet Jackson’s 2004 halftime-show wardrobe malfunction (an initial $550,000 forfeiture levied against the company by the Federal Communications Commission was vacated by the Third Circuit Court of Appeals, and the FCC has sought Supreme Court review).

Advertisers, too, care a lot as well, and it isn’t all about image. In an earnings release it filed with an 8-K on Tuesday, Chrysler cited last year’s game when mentioning an eight-fold increase in January sales of its Chrysler 200 vehicle, “nearly a year after appearing in the Imported from Detroit Super Bowl commercial.”

But executives also get in on the game, quite literally, when the companies they run buy them tickets to the big event. Most are pretty circumspect when talking about giving executives free tickets to big events — we see far more references to perks of generic “sporting event” tickets or “sports tickets.” Apollo Group (APOL), the big for-profit education company, has no such qualms, as we footnoted early last month.

The company has the naming rights agreement for the Arizona Cardinals’ stadium, giving them some benefits that are paying off now, according to the company’s December 28 proxy. That includes “fully-paid expenses (transportation, food and lodging) to the Super Bowl and NFL Pro Bowl each year for up to 4 guests per trip, a specified number of tickets to each Super Bowl held at the stadium and the right to buy a fixed number of additional tickets to each Super Bowl held at the stadium and up to a specified number of seats to Super Bowls held at other locations.”

As we said, most disclosures about sports-ticket perks are vaguer. Penske Automotive Group, Inc. (PAG) filed a proxy in March, 2011 showing that it provided “personal use of sporting event tickets” to at least a couple of its named executive officers. So did Universal Health Services, Inc. (UHS), which disclosed in its April, 2011 proxy that:

“From time to time, we make tickets to cultural and sporting events available to our employees, including our named executive officers, for business purposes. If not utilized for business purposes, the tickets are made available to our employees, including our named executive officers, for personal use.”

Other references in the filings are more oblique, but can still be illuminating. Groupon (GRPN) even got into the act in some of its many amended registration statements (S-1/A filings) last fall as it prepared for its IPO. In it, the electronic coupon company quotes an August 25 email to employees from its chief executive, in which he defends a dubious (and controversial) performance measurement, and in passing makes reference to the “reason we didn’t realize everyone in the world would hate our Superbowl ad…” (Last year, of course, Groupon tried to pull a Monster.com with a cheeky Superbowl ad debut, and instead ran three ads that fizzled, one of which was widely seen as mocking Tibetans for being poor and dominated by China.)

Some filings give an insight into ordinary working conditions at some companies: A collective bargaining contract included as an exhibit to the 10-Q that Republic Airways (RJET) filed on November 9 elevates the sporting event to the status of Christmas for some personnel purposes, noting that “During a period (e.g., Christmas Holidays, Superbowl weekend) when all Flight Attendants are required to present a doctor’s note for sick calls, prior notice will be given” before the restriction is put in place.

And of course, a few companies are just bragging: For some time now, truck-maker Oshkosh (OSK) has been saying in the Business section of its 10-K filings that the the company’s television-news trucks “have been used to broadcast the NFL Superbowl, the FIFA World Cup and the Olympics.”

Similarly, a couple of companies are boasting about directors’ roles on this year’s Super Bowl host committee. Nike (NKE) noted in its July 26 proxy that director John C. Lechleiter, who’s on the board because of “his operational executive experience and his knowledge of science, marketing, management, and international business,” was on the 2012 Indianapolis Super Bowl Host Committee, and tiny Pantry Inc. (PTRY) notes the same for director Mark D. Miles, who is deeply involved in a number of Indiana organizations and is the host committee’s chairman.

We’re not sure if these mentions tie into the SEC’s relatively recent requirement that companies lay out their board members’ business qualifications — a host committee has a lot to do in a short time, after all — or if it’s more just a way of recognizing an honor.

So as you settle back with your cold beer and 32-layer dip to watch the game (or maybe to read a good book in the next room instead), give a thought to the poor securities lawyers who are going to have to work developments off the field into company filings over the next 12 months.

Image source: American Football image via Shutterstock.com

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Fifteen months ago, we took Choice Hotels (CHH) to task for tearing up a departing executive’s carefully crafted severance terms in favor of an ad-hoc arrangement that the company admitted it wasn’t actually obliged to pay. As it turned out, that executive faced insider trading allegations by the Securities and Exchange Commission a few months later, which she settled without admitting or denying anything.

When it comes to disclosure and executive exits, however, we’d like to think someone over at Choice Hotels was paying attention: An executive vice-president is being shown the door again, and the hotel chain seems to be going more or less by the book. The book, of course, is the severance terms the company’s lawyers had written in advance. The outgoing EVP is Bruce Haase, whose broad portfolio included global brands, marketing and operations, and the executive is going to get pretty much what he was promised.

Not that it’s easy to figure that out. The 8-K that Choice Hotels filed yesterday was a model of brevity, at just under 350 words. Unfortunately, it could probably have been boiled down to just a sentence or so: “Go take a look at his employment agreement, and the amendments attached to the 8-K.”

We should stress that in this case, there’s no indication that Haase is leaving under any kind of a cloud. The filing simply says his departure “will be deemed a termination without cause under Mr. Haase’s Non-Competition, Non-Solicitation and Severance Benefit Agreement.” But there are also no numbers to make clear what’s happening. The document simply refers readers back to that melodiously named “Non-Competition, Non-Solicitation and Severance Benefit Agreement” and a new amendment, dated January 27. The amendment is attached as another brief document, but unfortunately it amounts to a laundry-list of changes, without saying much about the original terms. Similarly, a two-page Transition Services Agreement spells out his pay and benefits entirely in reference to his earlier agreement and the recent amendment (and federal law, which isn’t all that illuminating either).

Given time and a little effort, it is possible to piece all this together — that’s how we can tell you it works out to something like $2.7 million, going by the proxy that Choice Hotels filed on March 31, 2011 (or maybe a smidgen less, given the 6.6% decline in the company’s stock since the end of 2010).

Most of that is cash, at 18 months’ salary ($600,000) and the equivalent of a bonus target of $220,000, or 55% of salary. Health benefits and outplacement services — last month’s amendment says he can use any outplacement firm he wishes — amounts to another $38,000 or so. Some $248,967 represents the pension he can start drawing at age 65 (he’s now about 50 years old). The rest — some $1.7 million — comes from from the continued vesting of stock and options over the 18 months after his termination. Not included in there, as far as we can tell, is the $4.3 million or so he’s accumulated in his deferred compensation account, including more than $370,000 in employer contributions and company-paid earnings for 2010 alone.

Beyond the fact that they could have made it a lot easier for shareholders to get the complete picture, we do have one other (small) bone to pick with Choice Hotels: The company first mentioned that Haase would be leaving in a separate 8-K filed on January 20 — and good on them for doing so; we’ve seen companies do less for more prominent executives. But in that two-sentence filing, Choice Hotels said cryptically that, three days before, it and Haase had “agreed that Mr. Haase will relinquish his title and authority as an officer” on January 31, and that “this event will occur in connection with Mr. Haase’s planned departure from the Company” in the second quarter. That wording makes it sound like this was some long-planned transition, though we don’t see any previous reference to the move.

Anyway, we can pick nits — we’re good at that — but Choice Hotels is at least moving in the right direction, in terms of sticking to the severance terms it already has on the books instead of cooking up ad-hoc arrangements. Now maybe the company can work on making its disclosures a little more investor-friendly.

Image source: Business travelers exiting photo via Shutterstock.

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Some executive departures are more significant than others, which is why it’s one of the dozens of signals we keep an eye out for in corporate disclosures. To see what you’re missing in corporate disclosures — from M&A indicators to accounting gimmicks — check out footnotedPro, our subscription service for professional investors, where we highlight hidden pitfalls and potential opportunities well in advance of the market. For more information, or to inquire about a trial subscription, please email Todd Serpico.

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It’s a time of transition for the folks at Lockheed Martin Corp. (LMT), given the proposed cuts to the defense budget and the resulting possible reduction to the number of F-35 Joint Strike Fighter stealth jets that the Defense Department may order from the company. Yet there’s another transition within the executive ranks, as disclosed by the 8-K filed January 31.

After spending 37 years with Lockheed Martin, Ralph D. Heath, Executive Vice President of the Lockheed Martin Aeronautics Company, is ready to retire. Heath has served in that role since January, 2005 and – based on the information in the 10-K filed in February, 2011 – is (or soon will be) 63 years old. Although his official date to step down as the Executive VP of Aeronautics is April 1, Heath agreed to keep working as an Executive Vice President until April 30, reporting to President and Chief Operating Officer Christopher E. Kubasik during that last month. Accordingly, his official retirement date is set for May 1.

Between now and then, Heath will continue to earn his salary (calculated at $63,333 a month, or $760,000 per year) and benefits. But after May 1 he is set to get a nice check from the company and a consulting agreement, described in the filing as follows:

“Following his retirement, Mr. Heath will be paid $950,000 as part of the transition arrangement contingent upon executing a written release of claims…

Heath also agreed to provide “transitional consulting services” pursuant to a year-long consulting agreement. He can’t work more than 52 days between May 1, 2012 and April 30, 2013, but he will be paid $5,000 per day for his troubles. Lockheed Martin hasn’t filed either the Transition Agreement or the Consulting Agreement yet; but those may be filed shortly, or they may be filed with the annual report, which will probably be filed near the end of this month. However, given the $950,000 initial payment, and assuming Heath works the maximum number of 52 days as a consultant, his new, post-retirement gig is worth $1.21 million.

Of course, Heath will actually be retiring with far more money than that, having labored for so many years for the world’s largest defense contractor. In the March, 2011 proxy, the company disclosed that Heath’s interests in a variety of executive benefit plans (including the retirement plan and a supplemental plan, a Deferred Compensation account, a supplemental pension, and his various equity interests at the time) had an aggregate value of more than $15.78 million, assuming a termination date of December 31, 2010. That number is most certainly higher now, both because Heath continued to get equity awards in 2011 and because the stock is trading about 3.4% higher than it did a year ago.

Within the past couple of weeks, Secretary of Defense Leon Panetta announced that he was rescinding probation of Lockheed Matin’s F-35B program because of the great progress made in 2011. Thus, even with the looming budget cuts, at least Heath is making his exit on a high note.

Image source: Lockheed Martin Corp.

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On January 18, we published our 2012 footnotedPro M&A report, naming 10 companies we see as likely deal targets based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

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Are unfounded rumors getting worse, or are companies just more inclined to blame them for their woes?

We began to wonder about this after reading a new risk-factor disclosure from Jefferies Group (JEF), included in the 10-K the company filed on Friday. Here’s the relevant excerpt (emphasis in the original):

“Unfounded allegations about us could result in extreme price volatility and price declines in our securities and loss of revenue, clients, and employees.

In November 2011, we became the subject of unfounded allegations and false rumors, including among others those relating to our exposure to European sovereign debt. Despite the fact that we were able to dispel such rumors, both our stock and bond prices were significantly impacted. Our common stock suffered a 20% sell-off in minutes and, consequently, its trading was temporarily suspended, and our debt-securities prices suffered not only extreme volatility but also record high yields. In addition, our operations were impacted as some clients either ceased doing business or temporarily slowed down the level of business they do, thereby decreasing our revenue stream. Although we were able to reverse the negative impact of such unfounded allegations and false rumors, there is no assurance that we will be able to do so successfully in the future and our potential failure to do so could have a material adverse effect on our business, financial condition and liquidity.”

Now, in the case of Jefferies, to judge from reports from DealBook, Bloomberg News and elsewhere, it looks like the November sell-off was a mini panic, soon after MF Global succumbed to fears about its European debt exposure. We can’t help but notice that the plunge referred to in DealBook was nearly a month before the end-of-November period at which Jefferies now says it had a net short position in European sovereign debt. Nonetheless, it’s clear there was a real flurry of concern, however poorly founded.

The new disclosure got us wondering how many other companies were warning of similar problems, regardless of the evidence to support it. As we suspected, rumors seem to be on the rise — at least as a feature of corporate disclosures — but they’ve come and gone in waves over the years.

Drawing on the search capabilities of Morningstar Document Research (the service formerly known as 10-K Wizard, a sister-unit within Morningstar Inc. that we use to search, parse, slice and dice filings), we counted up the number of times “unfounded allegations,” “unfounded rumors” and related phrases showed up in 10-K, 10-Q and 8-K filings in recent years. Although there are plenty of other ways to say the same thing (always a problem in this line of work), and similar disclosures could turn up in other filings, we figured it’s a decent proxy for measuring the relative frequency of such disclosures, if not an absolute measure. (For one thing, it doesn’t capture this disclosure from Google, which Sonya footnoted last year.)

Jefferies is the first to use those terms this year, but last year, five companies used the term in 11 filings. By contrast, in 2010, just three companies used it, in six filings total. In 2009, three companies, once each. There was just one use in 2008, when you’d think rumors would have been most rampant in the run-up to the financial crisis. That was the most recent trough, though — from 2004 through 2007, the terms were used between five and seven times a year (and by five different companies most years). Here’s a rough graph of the results:

It’s pretty clear that last year marked a high-water mark for companies invoking unfounded rumors and allegations, and tied with several other years in terms of the number of companies invoking those terms. For what it’s worth, 2011 also recorded a high-water mark for the number of times companies used the terms (ie, counting multiple references in a single filing): 38 times, or more than double 2010, which came in second with 18 mentions.

What’s less clear is just how substantive these fears really are. Few of the filings offer even the specifics that Jefferies does. Some of them are fairly routine, and for the most part, the companies that use these phrases most frequently aren’t exactly household names. But in looking over the companies, at least a couple jump out as familiar, and those aren’t very reassuring.

Companies using the terms in 2005, for example, included American International Group (AIG), which filed a letter from an affiliate attempting to reassure key employees that they can count on their incentive pay (largely in company stock).

One of the other companies that year was Calpine (CPN), which filed an earnings presentation on May 6, 2005, that included a slide titled “Addressing Recent Market Issues” with bullet points “Unfounded Rumors” and “False Claims of a Calpine Bankruptcy.” In a blue box at the bottom of the slide, the company said boldly: “Recent Market Pressure Has Not Had An Impact on Calpine’s Ability to Manage its Power and Gas Assets.”

Not quite eight months later, on December 20, 2005, Calpine filed for bankruptcy, and didn’t emerge until early 2008.

Image source: whisper photo via Shutterstock.com

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Die-hard fans of Wal-Mart Stores, Inc. (WMT) may still be reeling from last Friday’s news that the retail giant is moving its iconic greeters to further inside the store, where they can help customers or direct them to shorter check-out lines — breaking with a 30-year tradition started by the store’s founder, Sam Walton. By making the move, Wal-Mart hopes to improve its profit margins and same store sales; in essence, though, the greeter has become just another associate.

Pinching pennies at the front door may actually be helpful for the company, however, given the significant cash that Wal-Mart has promised to pony up to a couple of  executives, according to an 8-K filed January 25.

One such executive is Rosalind G. Brewer, who was promoted into the role of president and CEO of Sam’s Clubs and will start her job on February 1 with a base salary of $800,000. She won’t have an employment agreement, but the 8-K revealed that her target cash bonus under the Management Incentive Plan (MIP) for the next fiscal year is set at 160% of her base salary, or $1.28 million, and she could get as much as $1.6 million.

Brewer will also get an annual equity award, including performance shares with a target value of $2,625,000 and restricted shares with a value of $875,000. The first award is subject to performance criteria over a three-year period; the second award vests on the third anniversary of the grant date.

But apparently the new salary, potential bonus, and up to $3.5 million in equity awards don’t really compensate Brewer adequately for her promotion, because the filing then adds:

“Ms. Brewer will also receive two additional awards of performance shares in connection with her promotion effective February 1, 2012, subject to approval of the CNGC [Compensation, Nominating and Governance Committee]. The first additional performance share award will have a target value of approximately $1,846,952, and will vest on the first anniversary of the grant date. The second additional performance share award will have a target value of approximately $1,797,014, and will vest on the second anniversary of the grant date.”

Thus, if the company’s performance meets whatever criteria are set by the Compensation, Nominating and Governance Committee, Brewer could get more than $3.64 million extra, which – to our way of thinking – even beats a celebratory promotion lunch at a swanky restaurant in Bentonville. Brewer also gets to use Wal-Mart’s jet for personal reasons “for a limited number of hours,” and the company is paying her relocation costs as she moves from Atlanta to Bentonville.

As for current Sam’s Club CEO and president, Brian Cornell, who joined the company in 2009, he advised his employer that he and his wife want to “move back to the Northeast for family reasons.” But even though he will cease being an executive on January 31, the filing notes that he will continue as “an associate” through April 1, 2012 (albeit one who gets “personal use of the Company aircraft for a limited number of hours”). The 2011 proxy doesn’t reveal Cornell’s base salary, but the 2010 proxy listed it as $800,000 at the time.

Although none of us will probably get an invitation to help Brewer celebrate her promotion, Wal-Mart made an announcement this morning that everyone can look forward to: The midnight party at 2,700 Wal-Marts to celebrate the DVD release of Twilight Saga: Breaking Dawn Part 1 set for February 10 is a go, complete with Edward and Bella collectibles, giveaways, and “Twilight-themed” bakery goods.

Image source: Wal-Mart, Inc.

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On January 18, we published our 2012 footnotedPro M&A report, naming 10 companies we see as likely deal targets based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

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