Sandell Objects to Southern Union's New Compensation Agreements
03 Septembre 2008 - 4:32PM
PR Newswire (US)
Believes Agreements are Entrenching and Further Evidence of the
Need for Shareholder Oversight on the Board NEW YORK, Sept. 3
/PRNewswire/ -- Sandell Asset Management Corp. ("Sandell"), the
largest individual shareholder of Southern Union Company ("SUG" or
the "Company") with ownership of 9.9% of the shares outstanding,
noted an 8-K filing by the Company late Thursday afternoon before
the Labor Day holiday weekend. This filing, without an accompanying
press release, detailed generous new compensation agreements
entered into with the top five executives and 20 other officers at
the Company. These agreements provide for severance payments to the
top officers regardless of whether a change of control occurs and
even more generous payments in the event of a change of control at
SUG. We strongly object to these agreements for the following
reasons: 1. This form of compensation is not tied to performance by
the executives. In fact, we believe it is a disincentive since the
executive is no longer required to perform in order to be lavishly
compensated and can only be replaced at significant cost to
shareholders 2. In the event of a change-of-control, these
contracts are a direct transfer of value from shareholders to
already highly-paid executives at SUG who have received generous
grants of equity which were supposed to align the interests of
executives and shareholders 3. In the case of Messrs. Lindemann,
Herschmann and Ms. Gaudiosi, the bonus amounts are inflated by the
outsized "special transaction bonuses" they received for completing
the Sid Richardson acquisition, adding "insult to injury" for
shareholders in our opinion 4. Based on the limited disclosure in
the 8-K filing, Sandell believes the total value of compensation
payable to the executives covered by the new agreements could
exceed $100 million with over $60 million payable to Mr. Lindemann
and Mr. Herschmann in certain circumstances. Sandell believes this
type of outsized, non-performance based compensation is a clear
sign that SUG's Board of Directors does not possess the necessary
level of independence from senior management to prevent what we
believe is a clear misappropriation of shareholder value. These
actions raise serious concerns with respect to the exercise of
fiduciary duties by the board and we believe the board and
compensation committee should be held accountable for their
decisions by shareholders for this type of "rubber stamp" activity.
This latest action firms our resolve that change is needed on the
board of SUG. In this regard, Sandell continues the process of
identifying potential candidates for nomination to the board of SUG
in order to improve the composition and function of this board
which we do not feel is acting in the best interest of
shareholders. Tom Sandell, the CEO of Sandell stated: "Southern
Union shareholders should be outraged at this clear entrenchment
device designed to transfer value to SUG's already well-compensated
management, especially during a time period where the Company's
shares are underperforming its peers and management has done
nothing to improve value for stakeholders other than themselves.
The only positive effect may be that management is now more
motivated to sell the Company, which we have already publicly asked
them to do." Sandell Asset Management Corp. is a multi-billion
dollar global investment management firm, founded by Thomas E.
Sandell, which focuses on global corporate events and
restructurings throughout North America, Continental Europe, the
United Kingdom, Latin America and the Asia-Pacific theatres.
Sandell frequently will take an "active involvement" in
facilitating financial or organization improvements accruing to the
benefit of investors. DATASOURCE: Sandell Asset Management Corp.
CONTACT: Mr. Tom Sandell, Chief Executive Officer of Sandell Asset
Management Corp., +1-212-603-5700
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