Tuesday, December 15, 2015

Top Empire District executives have $21 million in golden parachutes

What a sale of Empire District Electric Company would mean as far as cost of electricity or loss of jobs for the Joplin area is unknown.

What is known because it is in their contracts and because SEC laws require that they reveal it is how much the top five Empire District officials would make if they were to happen to leave their jobs, whether it be of their own volition or if they are shown the door.

A definitive proxy statement filed in March with the SEC reveals that Empire District's Electric Company's top officials are guaranteed more than $20 million in severance packages, including a whopping $7,262,979 for CEO Brad Beecher.

The officials would also be allowed to continue receiving their benefits for three years, including health insurance, life insurance, and accidental death and dismemberment insurance.

In addition to Beecher's $7 million plus, the following guarantees are made to top company officials:

-Chief Financial Officer Laurie Delano $4,526,790
-Chief Operating Officer Electric Kelly Walters $3,244,397
-Chief Operating Officer Gas Ron Gatz $3,128,615
-Vice President Commercial Operations Martin Penning $3,512,650

The total for the five officials is $21,412,452.

An examination of definitive proxy statements from previous years shows that Beecher's severance package has nearly tripled over the past two years, from $2,463,602 in 2013 to $7,262,979.

In 2013, the severance packages for the top five executives totaled $8,188,870, but has been increased by $13,223,582 over the past two years.

According to the terms of the agreements,the severance packages would be received in lump sum payments.

Reports: Empire District Electric for sale


Anonymous said...

Oh but by all means...let's look forward to the next 'needed' rate increase.

Anonymous said...

First thing to say is that they only get paid these sums if they are laid off or get demoted within 2 years after the company is bought, or if they quit within 18 months without getting a new job within the next 3 years (if they do get new employment, "including certain forms of self employment", they have to pay a pro-rata portion back).

So it isn't a "sell the company and get a windfall" deal, it's a "sell the company, lose your job in a way that hinders future employment, or quit and don't get another job, and get a big payment".

Which from the viewpoint of the shareholders is arguably a necessary incentive, otherwise these people would fight tooth and nail a sale beneficial to the shareholders but harmful to them.

And what they will get isn't quite as large as what the new company will be paying.

It may have gotten lost, but in a comment I made to the previous discussion of this, I calculated that net of the tax gross up, Mr. Beecher would get "only" $4,662,311, but of course the new entity would be paying the 7 million plus total, $2,600,668 in his gross up.

A tax gross pays a person money he'll then pay to the government in taxes that he otherwise wouldn't be paying if things were normal, remember Team Obama's most famous tax cheat Timothy Geithner who got paid a tax gross up by the IMF but then didn't his taxes due.

After subtracting their gross ups, here is what the five would be taking home if the company is sold and they separate from the new company on the 31st this month, which is obviously too soon, the figures will be different if it happens later:

B.P. Beecher 4,662,311
L.A. Delano 2,853,329
K.S. Walters 2,122,386
R.F. Gatz 2,041,619
M.O. Penning 2,230,298

Anonymous said...

Re 8:49

The depth of analysis is interesting, but it doesn't change the point. Gross or net; it is a lot of money. Most of the people on that list would retire and thus get close to the full amount. Brad would get the full amount or a hefty sum to not seek employment or if he did seek an executive position he would have a lot of leverage for future negotiations.

The Board's action in offering the huge increase in parachute money over the past 2 years indicate they were looking to give the executive team a big incentive to sell. In doing so they have run contrary to the stakeholder vs stockholder philosphy of managment which is something EDE has been preaching for years.

Bottom line... I guess it takes a lot of money to sell out your community. Hope it is worth it!

Anonymous said...

That explains why my electric bill has increased the past 5 years!

Anonymous said...

9:08 AM: Not, this, this and this explain why your electric bill increased in the past 5 years. These golden parachutes, if any of these people pull the cord, will further explain why it increases in the next 5 years (and beyond?), if the company is sold.

Anonymous said...

The ones that will be hurting will be the workers that keep your lights on. The ones that work out in the ice storms and the lightning. This is a dangerous job and we have been told they appreciate out safety record. They should it by not even telling the employees first before we heard about it on the radio, Facebook and the news. Merry Christmas.

Anonymous said...

Re 9:49

That pretty much sums up employee morale. EDE had never been very big on Christmas (at least not recently) but that annual lump of coal sure beats this year's stab in the back.

Anonymous said...

Actions speak Lowder than words. We now know what they really think of there employees. Don't give us any more of those pep talks about doing the right thing.

Anonymous said...

Fear not. Empire will be sold to Shell, which will convert Riverton to burn oil instead of coal. When this is done across the country, they will manage to get the cost of oil back to where it belongs, namely triple what it is today.

Anonymous said...

let me think, ... yeah, yeah BB bailed out last time the company was bought and then came back from KC as a $million VP.

Anonymous said...

All the electric cooperatives that surround Empire should all get together and buy this worthless company out. A cooperative would keep it fair.

Dusty Roads said...

A bunch of over paid hacks...business as usual in Joplin