highest-ranking executives stand to reap more than $50 million from their
equity holdings alone, filings show.
Presuming the deal with billionaire investor Sam Zell concludes as
scheduled, the biggest share of the payday would go to Dennis FitzSimons,
Tribune’s chairman, president and chief executive, according to Securities and
Exchange Commission filings. FitzSimons, who has worked for Tribune since
1984, controls about 673,000 shares of common stock, which would be worth
$22.9 million at the $34-per-share price offered by billionaire Sam Zell.
Like FitzSimons, many Tribune executives have significant stock holdings,
the result of long stints at a media giant that granted large numbers of stock
options to its top brass for much of the past decade. Scott Smith, president
of Tribune Publishing Co., holds stock and options worth at least $10.2
million; Donald Grenesko, senior vice president for finance and
administration, controls equity worth $10.8 million, filings show.
“That’s how it’s supposed to work,” said compensation expert Don Delves,
president of the Chicago-based Delves Group. “They’ve built up hefty stock
ownership over their careers. They have every incentive to strike the best
deal.”
Tribune executives will be eligible to cash in their equity, including
unvested restricted stock and options, under a compensation plan established
by Tribune that is triggered by a “change in control.”
That phrase is defined in the company’s proxy statement as a merger or a
reorganization, an upheaval of the media conglomerate’s board, or if one
person or entity gains voting control over more than 20 percent of the
company’s stock.
FitzSimons wouldn’t say Monday whether he and other executives plan to
cash out their holdings or convert them into equity in the new company.
However, the total payout to FitzSimons and his lieutenants could total
millions more if they take advantage of contract terms that let them walk away
from the company with full severance, provided they stay on board for at least
13 months following the deal.
The cadre of top Tribune officials stands to pocket between two and three
times their highest annual salary over the past three years and 200 percent of
their target bonus to be paid during the year the deal occurs.
The total amount FitzSimons and others could receive will depend on their
pay for 2007, which hasn’t yet been disclosed by Tribune, whose media holdings
include the Chicago Tribune. Based on his salary of $985,000 in 2006,
FitzSimons would be eligible for at least a payout of $3 million, as well as
additional $108,498 payment for participating in a pension plan that was ended
in the late 1990s.
In all, 24 executives and “other key employees” qualify for sweetened
severance terms, according to SEC filings. That could set the stage for a mass
exodus among the company’s senior ranks next year, Delves said.
“Will a lot of people walk after 13 months? You bet they will, unless the
new company makes them an extremely lucrative offer,” he said.
If they lose their jobs within 36 months of the transaction, or leave under
certain circumstances, they also qualify for the same severance. Tribune
executives, however, likely won’t see much benefit from their stash of stock
options, often a source of considerable compensation in company buyouts.
FitzSimons, for example, held 1.8 million options as of February 2006, the
most recent filing on options provided by the company to the SEC, while the
top five executives combined held a total of 4.1 million options.
However, many of these derivatives were issued earlier this decade, when
Tribune shares regularly hovered around $50 a share. As a result, they are
“under water,” meaning their strike price, which is set at the closing stock
price on the day they were granted, far exceeds the per-share price offered by
Zell.
FitzSimons, for example, received 1.5 million options between 2002 and
2004, with exercise prices ranging from $40.59 to $52.63 a share. A Tribune
Co. spokesman couldn’t say how many of FitzSimons options were under water,
noting that his holdings could include options issued a decade ago, when the
stock was trading in the current range.
It’s certain, however, that FitzSimons could reap some benefit from the
300,000 options he received in 2006. They have a strike price of $31.16,
netting him $852,000 from Zell’s payout price.
– – –
Tribune executives’ stock holdings
A look at how top Tribune executives’ stock and options will be valued,
based on Tribune selling for $34 a share.
Dennis FitzSimons
Chairman, president and CEO
Stock
Shares: 672,965
Value: $22.9 million
2006 Options
Options: 300,000
Value*: $852,000
Scott Smith
President, Tribune Publishing
Stock
Shares: 295,147
Value: $10.0 million
2006 Options
Options: 90,000
Value*: $255,600
Donald Grenesko
Senior VP, finance and administration
Stock
Shares: 312,709
Value: $10.6 million
2006 Options
Options: 85,000
Value*: $241,400
John Reardon
President, Tribune Broadcasting
Stock
Shares: 116,898
Value: $4.0 million
2006 Options
Options: 60,000
Value*: $170,400
Crane Kenney
Senior VP, general counsel and secretary
Stock
Shares: 104,962
Value: $3.6 million
2006 Options
Options: 60,000
Value*: $170,400
*Options values are for options granted in 2006, at a price of $31.16.
Note: Shares include restricted stock grants
Source: SEC filings
Chicago Tribune
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jjohnsson@tribune.com
