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CEO's fat pay was stock, not cash, paid per 1991 Employment Agreement.
Unless I misread the 1997 Proxy statement, the compensation awarded
to CEO Coss was principally in the form of shares of stock (not
cash). The grants (detailed below in an excerpt from the proxy
statement, total some 5.7 million shares (I don't know how many, if
any, Coss has sold. Now, with about 140 million shares out, that
means that Coss received 4% of the company as his principal
compensation for the work since 1991. During that time, his cash
comp was max $400,000 per year. A pittance for a company this size
and performance. Further, the compensation, according to the SEC
filing, was a result of the Employment Agreement executed by he and
GNT in 1991, as detailed in GNT's 1997 Proxy statement. So, the
company was bound to pay off for the performance delivered. As
they should anyway.
Note the remarks I've excerpted from the Compensation Committee,
regarding the performance of the company and its shareholder value
over the last 6 years. It sounds like Coss earned the 5.7 million
shares. Incidentally, if he still holds those, he's watched some $225
million in value diminish to $165 million with the fall of the price
of GNT.
It looks to me like Coss has every incentive to get the stock price
up again. Especially since he just got options for 2 million
shares @30.875 as his principal compensation for 1997, and they
aren't exercisable for a period of years, 20%/year starting at
the end of 1997. He's in this for the long haul.
This data is derived from the proxy statement filed in preparation
for the 1997 Annual Meeting,at:
sec.gov
Doug Simpson
Owns no GNT, but is considering the purchase.
_____________________
EXECUTIVE COMPENSATION
The annual compensation for executive officers, including salaries,
Directors' fees, bonuses, and option awards for the years ended
December 31, 1994, 1995, and 1996, was as follows:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(2)
------------------------------------------
NAME OF INDIVIDUAL SECURITIES
AND PRINCIPAL POSITION SALARY BONUS UNDERLYING
- ---------------------- YEAR ($)(1) ($) OPTIONS
------------------------------------------
<S> <C> <C> <C> <C>
Lawrence M. Coss.................. 1996 $433,608 $102,015,158(3) 2,000,000(4)
Chief Executive Officer; 1995 433,608 65,146,594(5) None
Chairman of the Board 1994 433,608 28,544,354(6) None
Robert D. Potts................... 1996 383,016 1,250,000 250,000
President and Chief 1995 333,000 850,000 300,000(7)
Operating Officer; 1994 281,008 600,000 None
Director
Richard G. Evans.................. 1996 268,000 350,000 85,000
Executive Vice President; 1995 258,000 350,000 100,000(7)
Director 1994 235,500 280,000 None
Jerry W. Britton.................. 1996 209,000 400,000 160,000
Executive Vice President 1995 131,428 200,000 100,000(7)
1994 N/A N/A None
Bruce A. Crittenden............... 1996 184,000 400,000 160,000
Executive Vice President 1995 70,346 75,000 80,000(7)
1994 N/A N/A None
</TABLE>
- --------
(1) Includes other compensation in the form of Director's fees,
if applicable and car allowances. Other compensation included
does not exceed the lesser of $50,000 or 10 percent of the total
compensation and is not separately shown.
(2) The Company did not issue any restricted stock to the executive
officers listed or any other employees in 1996.
(3) Includes $94,650,000 (2,400,000 shares) of the Company's Common
Stock earned as bonus, before stock withheld for federal and state
tax withholdings.
(4) Granted pursuant to the 1997 Chief Executive Cash and Stock Bonus
Plan previously approved by stockholders.
(5) Includes $59,212,820 (1,998,745 shares) of Company Common Stock
earned as bonus, before stock withheld for federal and state tax
withholdings.
(6) Includes $24,538,866 (1,349,216 shares) of Company Common Stock
earned as bonus, before stock withheld for federal and state tax
withholdings. Share amount is adjusted for a two-for-one stock split
in the form of a dividend distributed October 15, 1995.
(7) Option amount is adjusted for a two-for-one stock split in the
form of a dividend distributed October 15, 1995.
6
<PAGE>
* * *
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
* * *
During 1996, the Committee considered the growth of the Company's
business and the returns it generated for its stockholders in
setting annual bonuses. In particular, the Committee considered
the Company's significant increase in the principal balance of loans
originated in 1996 over 1995. The principal balance of loans
originated by the Company for 1996 was $10.6 billion, an increase
of 53 percent over the prior year's originations. Strong loan
originations led to record revenues of $924 million, a 30 percent
increase over the prior year, and record net earnings of $309
million, an increase of 22 percent over the prior year. Lastly,
the Committee considered the Company's 28 percent return on equity
and the total return to stockholders (including dividends reinvested)
in 1996 of 48 percent, a return well above the Company's peer group.
* * *
Compensation of Chief Executive Officer for 1996. The compensation
of the Company's Chief Executive Officer for 1996 is based entirely
on an employment agreement between Mr. Coss and the Company entered
into in 1991 (the "1991 Employment Agreement"), extending similar
employment and compensation arrangements that have been in effect
since 1983. The 1991 Employment Agreement, which expired on December
31, 1996 provided that, in addition to a base annual salary of
$400,000, Mr. Coss would receive an annual bonus as provided in his
employment contract. For a description of the 1991 Employment
Agreement, see "1991 Employment Agreement With Chief Executive
Officer" beginning on page 11.
The Committee believes that the compensation arrangements with Mr.
Coss meet the Company's overall approach to performance-related
executive compensation and its goal of retaining and motivating a
highly qualified Chief Executive Officer responsible for setting and
implementing the strategic direction which has enabled the Company to
perform at a very high level. The 1991 Employment Agreement aligned
management and stockholder interests by linking a substantial
portion of Mr. Coss's cash compensation to pretax earnings, with
the result that Chief Executive Officer compensation improved
directly in relation to improved Company profitability. The agreement
also provided that a significant portion of Mr. Coss's compensation
was payable in Company stock. The Committee believes that the
equity position that Mr. Coss has in the Company as a result of
the 1991 Employment Agreement has provided Mr. Coss with long-term
incentives to help the Company achieve strong financial performance.
The Committee firmly believes that the Company's compensation
policy for its key employees, which emphasizes long-term incentives
through equity appreciation, has been a key contributing factor in
the extraordinary financial performance of the Company over the last
five years. The Company's market capitalization during this period
has increased from approximately $460 million at December 31, 1991
to approximately $5.3 billion at December 31, 1996. The Company's
earnings per share has grown at a compound annual rate of 34 percent
over the five-year period, from $0.50 per share to $2.20 per share.
The compound total annual return to stockholders over the last five
years, which includes reinvestment of dividends, was 53 percent. For
additional information on stockholder performance and the
performance graph, see "Performance Graph" on page 4. The Committee
has reaffirmed its commitment to emphasize policies which will
contribute to the long-term growth of stockholder values. It is with
this commitment that the Committee approved a new employment
agreement with Mr. Coss which became effective upon the expiration
of the 1991 Employment Agreement.
9
<PAGE>
Employment Agreement With Chief Executive Officer beginning in 1997.
At the Committee's meeting on February 9, 1996, an agreement was
reached with Mr. Coss as to the terms of a new five-year employment
agreement to be effective January 1, 1997 (the "1997 Employment
Agreement"). The Committee determined that an increase in base
salary from $400,000 to $600,000 per year was appropriate, as Mr.
Coss's base salary had not been increased since 1985. At this level,
Mr. Coss's base salary would continue to rank in the fourth (bottom)
quartile of chief executive officers of large financial services companies and is
consistent with the Committee's policy of establishing modest base
salaries for key employees. The cash bonus and long-term incentive
provisions incorporated into the 1997 Employment Agreement are: (1) a
cash bonus to be determined pursuant to a new chief executive bonus
and stock option plan (the "1997 Chief Executive Plan"); and (2) the
issuance to Mr. Coss of a two million share stock option award
pursuant to the 1997 Chief Executive Plan. For an additional
description of the terms of the 1997 Employment Agreement, see "1997
Employment Agreement With Chief Executive Officer" beginning on page
11, below. The 1997 Chief Executive Officer Plan was approved by
stockholders at the Annual Meeting on May 15, 1996.
1997 Chief Executive Plan. The 1997 Chief Executive Plan, which was
approved by stockholders at the May 15, 1996 Annual Meeting, provides
for an incentive- based cash bonus formula equal to 2.5 percent of the
net income of the Company in excess of a 12 percent return on equity
("ROE"). Based upon the advice of the Consultant and the Company's
extraordinary record over the past five years in terms of stockholder
performance returns, the Committee determined that it would be
appropriate to target total cash compensation for Mr. Coss within the
first (top) quartile of cash compensation of chief executive officers
of "large cap" public companies. In choosing a base or threshold level
of performance of ROE, the Committee considered the historical ROE and
comparative information provided by the Consultant.
The Committee also concluded that a stock option grant would create
added positive incentive for Mr. Coss to continue to lead management's
efforts to sustain the Company's strong financial performance. The
Committee carefully considered the following factors in deciding to
grant stock options rather than a stock bonus as provided in the 1991
Employment Agreement, and in determining the number of options to
grant to Mr. Coss pursuant to the 1997 Chief Executive Plan: (1) the
extraordinary growth of the Company in terms of loan volume, income,
net earnings, stockholders' equity and market capitalization; (2) the
desire to provide additional long-term incentives to foster continued
strong growth in stockholder values; (3) the equity made available to
other chief executives of public companies who have developed
strategies and have guided management in the execution of such
strategies to achieve a significant increase in stockholder value; (4)
Mr. Coss's present level of investment in the Company; and (5) the
accounting treatment of stock options which would not involve a charge
to earnings. No one factor was given more weight than another factor
by the Committee, and the Committee made a determination that an
option grant to Mr. Coss of two million shares was appropriate.
Statement Regarding Tax Policy Compliance. Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), generally
limits the Company's federal income tax deduction for compensation
paid in any year to certain named executives (including the Chief
Executive Officer) to $1 million, to the extent that such compensation
is not "performance-based compensation" within the meaning of Section
162(m) and the Treasury Regulations promulgated thereunder.
Accordingly, in structuring the Company's compensation arrangement
with its Chief Executive Officer under the 1997 Chief Executive Plan,
the Committee designed an incentive bonus formula and stock option
plan which was intended to qualify as "performance-based compensation"
in order to decrease the after-tax cost of such arrangements to the
Company. In compliance with Section 162(m), the 1997 Chief Executive
Plan, which provides for incentive-based compensation, was approved by
stockholders. Mr. Coss's compensation for 1995 and 1996 is pursuant to
the 1991 Employment Agreement, which is grandfathered under the
provisions of Section 162(m).
By the Compensation Committee:
W. Max McGee
Robert S. Nickoloff
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