Not too long ago, we wrote about the compensation rankings of GC’s. Unlike the pure fiction that is PPP, when GCs are among the top-paid executives of reporting companies, their specific compensation has to have some basis in reality.
Of course, that’s just a loose attenuation, as there are so many different components that companies use and the targets can be set and re-set seemingly at will.
After the jump, we take a deeper dive on how one GC’s comp is calculated.
Time Warner is gearing up to spin off AOL, so the corporate housekeeping has begun. Among other preparatory activities, the company just bought back Google’s 5% stake for $283 million – for which Google paid $1 billion in 2005.
More importantly, the preliminary information statement was just filed, and it gives plenty of detail on GC Ira Parker’s pay package and how it was developed. We’re not employment lawyers, so forgive us for errors in translating this into plain English.
Bio
First, Parker’s background:
Executive Vice President, General Counsel and Corporate Secretary since 2006; Mr. Parker has also served as Executive Vice President, Corporate Development since February 2009 and also, from January 2008 to June 2009, served as Executive Vice President, Business Development. Prior to joining AOL, Mr. Parker served as Vice President and General Counsel, Corporate Secretary, and Chief Compliance Officer at Polaroid Corp. Prior to joining Polaroid in February 2004, Mr. Parker served as President and Chief Executive Officer at Genuity, Inc. from February 2003 to December 2003; prior to that, he was Executive Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer of Genuity. Prior to joining Genuity in June 2000, Mr. Parker was a Vice President and Deputy General Counsel at GTE Corp. for two years and was a partner in the Washington, D.C. law firm Alston & Bird for three years. Before that, Mr. Parker spent nearly 10 years with the Federal Deposit Insurance Corp. in Washington, D.C. in various legal positions including Vice President and Deputy General Counsel of the FDIC’s Resolution Trust Corporation.
It’s not mentioned there, but Parker went to Emory law school and CUNY Brooklyn for undergrad.
Responsibilities
As is standard, his responsibilities are “defined” for purposes of his performance-based comp. All employees are responsible for adhering to the “Global AOL Values”* and Parker has the following specific responsibilities:
-Develop and execute overall cost reduction strategies, including decreasing costs incurred by using outside counsel, while continuing to provide superior client service.
-Expand the Business Development Group with measurable goals in terms of value added to the Company, both in deals consummated and costs saved.
The first one goes to the GC hat, the second goes to the director of corporate development role. But both mean bad times for outside counsel.
It’s also interesting that his GC responsibility doesn’t include anything about delivering high-quality legal services, reducing/managing corporate risk, and the other usual hallmarks of that role.
Status
When Parker took the Business Development title he got a new employment agreement.
Mr. Parker received a new employment letter agreement on January 7, 2008, in connection with his promotion to include the position of the Company’s Executive Vice President, Business Development (“EVP, Business Development”). After reviewing published market survey data along with internal comparisons across Time Warner and the Time Warner divisions, the Company increased Mr. Parker’s base salary to $550,000 retroactive to the date of his promotion in 2007, reflecting a 22% increase based on his additional responsibilities and title and his high performance level.
Good thing he got the raise when he did:
As a result of the global economic downturn and declining revenue and profits at the Company, Time Warner and the Company’s CEO, CFO and EVP, HR decided that none of the Company’s executive officers would receive a salary increase in 2009.
Current Cash
As with most inhouse jobs, base salary is just one of many components of total pay. Parker is eligible for a cash bonus of up to 100% of base salary, based on his own personal performance (30%) and the company’s adjusted operating income (70%).
Target annual cash compensation for Mr. Parker was increased by $312,500 to $1.1 million. Consistent with the Company’s pay-for-performance compensation philosophy, $212,500 of the increase was attributable to target annual bonus (which was increased to 100% of Mr. Parker’s base salary from 75%), while the remaining $100,000 was reflected in base salary (which was increased to $550,000 from $450,000). Mr. Parker’s base salary increase became effective retroactive to December 1, 2007. Therefore, he received a supplemental base salary payment in February 2008 equal to the difference between his prior rate of base salary and his increased rate of base salary for December 2007. In addition, Mr. Parker received a payment on April 15, 2008 in the amount of $120,000 for commuting expenses to cover travel between Boston, Virginia and New York during the period of April 1, 2008 through March 31, 2009, in lieu of requiring Mr. Parker to relocate, given the uncertainty of the future location of the Company’s headquarters in anticipation of a potential transaction.
The really nice piece of work in that paragraph is that he got his raise made retroactive by more than a year! It’s not uncommon for top-level executives’ annual pay raises to go back to January 1 of the year in which they’re announced, but he got a full year on top of that.
Of course, the rank-and-file’s raises are effective in the next paycheck (or later) after they’re announced, which doesn’t exactly engender a lot of goodwill.
And yes, he got $10,000/mo because he didn’t know which office to go to (which was later extended for another year, plus he got some free car service). And, of course, when he does move, they’ll use a relocation service that will make sure he, at worst, doesn’t take a loss on the sale of his current home and they’ll pay or reimburse him on a grossed up basis, for the other expenses of the move.
Long-Term
Then there’s long-term comp. After a few years, this is where inhouse jobs start getting competitive with private practice. Basically, after the three- or five-year vesting, it’s another annual bonus and when things are going well, the payouts can be handsome. Of course, in down years, they can go down to zero. AOL historically paid out in Time Warner shares. Post-split, they’ll be getting AOL stock.
Like many companies, AOL will be paying long-term incentives in a combination of stock options (exactly what you think they are – current grants of a right to convert at some higher price in the future), restricted stock units (the right to receive a fixed number of shares), and performance stock units (the right to receive an amount of common stock based on the stock’s performance relative to some index).
All of that is impossible to quantify until it starts vesting.
Special Pay
Then there are the “special” bonuses that pop up from time to time for inhouse lawyers. Parker got a $550,000 retention bonus to keep him on board through the spinoff. These aren’t entirely uncommon for inhouse counsel (although his was certainly at the higher end, but considering he was both GC and in charge of corporate development, it’s not out of line). He also has another retention bonus to keep him on board through next spring, when he’ll get an additional $220,000.
Since 2009 was a highly volatile year, they had yet another reason to pay out additional money. The AIP was suspended, and a one-year “GBP” (Global Bonus Plan) was put in place, which paid bonuses targeted at 75% of base comp for employees in good standing on the two payout dates. Parker got $206,250 from that on July 15 and another equal payment will be paid by March 15, 2010, if he’s still with the company then and if the company hits adjusted operating income targets.
Also don’t be surprised if he gets another “success” bonus or something like that for actually closing the deal.
Golden Parachute
Parker gets a golden parachute equal to 18 months’ pay, plus COBRA payments on the usual triggers.
Total
All told, Parker took home cash of just under $1.1 million in 2008, which was about one-third of his boss’s take home last year – Paul Cappuccio, GC of Time Warner, came in at #7 on the list, taking home $3.05 million. 2009 looks to be substantially better for Parker, with more than $700,000 in additional cash being paid already. Parker would have been #80.
* The Global AOL Values are “operating with integrity, working collaboratively, creating an inclusive work place, being outwardly focused and driving performance and innovation.” For the non-inhouse contingent of our readership, every company has one of these esoteric statements of principle, they just change the name and the synonyms. IBM’s “values” are “Dedication to every client’s success; Innovation that matters, for our company and for the world; Trust and personal responsibility in all relationships.”
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