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February 15, 2005
Temple-Inland: Parent Company of Guaranty Bank
Temple-Inland changes CEO's contract
Terms changed after raider Icahn reveals plans to buy a big stake
By Renuka Rayasam
AMERICAN-STATESMAN STAFF
Tuesday, February 15, 2005
Less than two weeks after corporate raider Carl Icahn announced he would buy a huge stake in the company, Austin-based Temple-Inland Inc. changed the employment contract for CEO Kenneth Jastrow.
Now Jastrow will get as much exit money if he decides to leave the company after a sale or breakup as he would have if he'd been fired without cause. That's three times his annual salary, plus bonus and benefits.
On Feb. 4, Icahn and his hedge fund declared their intention to buy as much as $1 billion worth of the company's shares. That would make a man known for breaking up companies Temple-Inland's biggest shareholder.
Jastrow's employment contract was changed Friday.
The three-year contact allows Jastrow to walk away from the company six months after a change in control, such as a sale, provided he gives 30 days notice, and still collect a generous severance package.
Jastrow's base salary is $925,000, according to a company filing with the Securities and Exchange Commission.
But he also receives an annual bonus and benefits including a car allowance, club memberships and use of the company plane. In 2003, his bonus was $250,000, almost 30 percent of his base pay. However, bonuses fluctuate widely.
Temple-Inland would not comment about the contract.
But Patrick McGurn, executive vice president at Institutional Shareholder Services, which provides corporate governance advice, was critical.
Employment contracts should ensure that chief executives get something in case of a hostile takeover or other offers, so that CEOs don't oppose changes that might benefit shareholders, McGurn said.
But McGurn questioned whether the broad changes to Jastrow's contact will benefit shareholders.
"It looks like one of these typical one-sided negotiations where all provisions are in the CEO's favor," he said. "It is surprising that in this day and age that a decision like this still gets rubber-stamped by the board."
It's not clear how much stock Icahn may already own in Temple-Inland or whether he would buy up to the maximum amount he indicated. Under federal law, investors seeking to buy very large stakes in a company must seek clearance and abide by a waiting period.
But some analysts say he would likely seek to sell off parts of the company, which has interests in lumber, packaging and financial services.
In 1999, Temple-Inland instituted a so-called poison pill defense to protect against hostile takeovers. Those provisions kick in whenever someone acquires 25 percent of the stock and would allow the company to issue new shares, thereby diluting the stake of the unwelcome acquirer.
Icahn is proposing to buy up to about 24 percent, based on Monday's closing share price of $75.46.
However, companies can toughen their anti-takeover defenses at any time.
Posted by beth at February 15, 2005 11:06 AM