I hope you took your Blackberries with you because otherwise this one is going to be too late as U.S. Bancorp’s annual meeting is today and it is actually having a vote on whether you, as shareholders, actually approve of its executive compensation package. On an advisory basis, of course. (Buy the governance risk profile for U.S.
Bancorp here)
You’ve probably got from my tone so far that we don’t… approve of its compensation package, that is.
So let’s try and figure out why.
Apart from having outstanding stock options coming out of the old wazoo – and at least this year’s was a little more moderate than previous grants – there’s quite a bit of foolishness going on.
First: there’s the $7 million retention award in 2009. I mean, where’s he going? He’s been with the bank in its various configurations since 1993 at least. He’s a company man.
Second: we have a picture of a CEO declining compensation and the board and compensation committee falling over itself to give it back to him.
Base salary reduction? Only 5 percent and only allowed to last from January to October 2009.
No thanks to the cash bonus and the long-term incentive for 2009? Yes, that’s all very well, but we insist!
I mean, it’s right there in the CD&A.
In 2009, the Committee awarded Mr. Davis an annual incentive cash bonus of $1,255,500 under our EIP for the year ended December 31, 2008. In addition, he was granted a long-term incentive award in January 2009 for 2008 performance valued at $5,000,000. Mr. Davis declined to accept either the cash bonus or the long-term incentive award. However, in October 2009, the Committee recommended that Mr. Davis accept this award based on the fact that under his leadership we had passed the government-imposed “stress test,” repaid the funds invested by the government under the TARP and repurchased the related warrant, all while remaining profitable. Mr. Davis agreed to accept both the cash bonus and the long-term incentive award.
What is this?
“No, It’s fine, the banks going through a tough time with this economy. Honestly. I can get by on my base.”
“No, Sir, we insist, please, it’s only a little bonus. Not even as big as last year’s.”
“Yes, well, we didn’t hit our EPS targets this year.”
“That’s not the point, Sir.”
“Well, it is really.”
It’s like watching Monty Python’s Meaning of Life with the waiter trying to press just one more tiny wafer-thin mint onto Mr. Creosote. But without the buckets.
Retention?
He’s got more than 3.7 million underwater stock options. Worth nothing at the moment. Isn’t that motivation enough to stick around and work so the stock price is above the exercise price and you can actually make some profit on those?
Never mind just voting against the pay package. What about the members of the compensation committee too? Arthur Collins. Jerry Levin. Richard Reiten. Patrick Stokes. Boy have they been on the board a looooooooooong time. 14, 15, 12, and 18 years respectively. Time for a change of scene?
Paul
Hodgson - Senior Research Associate
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