TheStreetCom : CNC Sets Rich Pay Package for New CEO.
Conseco Sets Rich Pay Package for New CEO
thestreet.com
By Peter Eavis
Senior Writer
7/10/00 7:30 PM ET
So this is how Conseco (CNC:NYSE - news) got Gary Wendt.
Wendt, former head of GE Capital, the finance unit of General Electric,
is getting $45 million just for joining
the ailing insurance and finance firm, according to details about the executive's five-year contract, filed with the Securities and Exchange Commission Monday.
Another part of Wendt's platinum handshake is
an options grant of 10 million shares, a fifth of which already has vested.
With a strike price of $5.875, the 10 million options
already have yielded a paper profit of around $40 million, going by Conseco's closing price of 9 3/4 Monday.
Carmel, Ind.-based Conseco reported a 70% decline in
profits in the first quarter and has, for the last year or
so, been at the center of accounting controversies that
have knocked the stock 70% off its 52-week high.
"There's no risk for Wendt," says Kathy Shanley, analyst at
Gimme Credit, which doesn't do underwriting. "Wendt's a
smart man. He certainly got paid," says one New York-based
hedge fund manager who has sold Conseco's shares short, a
trade that will benefit him if the company's stock
declines.
Big Numbers
Wendt, who became chief executive at the end of June, also
will receive up to $60 million in further cash payments
over the next five years if he fulfills certain
performance targets.
He stands to make $50 million if Conseco's average stock
price is 20 or more in the 20 trading days before June 30, 2002.
At the bottom end of his bonus scale, if the average stock
price is less than 10, he qualifies for an $8 million
bonus.
In addition to the cash, the 57-year-old Wendt could get a
further 1.5 million options, as well as
a restricted grant of $4.5 million worth of common stock,
in the last three years of the agreement, extending from
2003 to 2005, if he clears earnings-based performance
hurdles.
"A lot of [Wendt's package] is performance-based,"
says a Conseco spokeswoman.
The terms for the last three years of the package
"are reflective of a company our size and the industry
we're in," she adds. Wendt didn't immediately comment.
If Conseco is bought before June 2002 -- and some analysts
have predicted an outright sale -- Wendt's cash and options
bonus payout is automatically triggered, and its size is
based on the average stock price prior to the change of
control date. If large, this could put off prospective
buyers.
High Profile
If he does get Conseco's stock over 20, Wendt could snag
well over $250 million, which is nearly half the company's
1999 net income of $593 million.
That could lead some to question the potential size of his
package.
However, Conseco's fans hope Wendt is one of the
few finance executives capable of turning around the
cash-strapped company.
He built GE Finance into a $4 billion-asset company between
1984 and 1998. But others note that restructuring Conseco
is a much tougher job than working at GE, which has a
pristine reputation among investors and an excellent credit
rating. That guaranteed GE Finance easy and cheap access to
capital, something that Conseco doesn't enjoy.
Also announced in the agreement Monday,
a GE subsidiary gets warrants entitling it to
10.5 million Conseco shares. This serves as payment to GE
for releasing Wendt from a noncompete agreement.
What's interesting, says the hedge-fund manager who is
short Conseco, is that GE apparently didn't want to put up
much cash to buy into Conseco in any form.
Wendt temporarily became a household name during his
divorce from ex-wife, Lorna, who claimed that because she
had sacrificed her career to be a so-called corporate wife, she deserved 50% of her husband's wealth. She ended up
getting an estimated $20 million, an award that Wendt is
reportedly appealing. He disputed at the time his wife's
estimate that he was worth around $100 million. Not so easy
now. |
