Despite the visibility that has tempered the way companies structure outgoing pay packages the past two years, one executive traditionally high on the Plastics News executive compensation ranking will almost certainly be the beneficiary of a billion-dollar exit package when he steps down this year, and another has the potential to leave with $36 million.
The Divisional Court of the Ontario Superior Court of Justice Aug. 30 approved the $1 billion-plus buyout for Frank Stronach, the retiring 77-year-old founder and chairman of Canadian auto parts giant, Magna International Inc.
Several institutional shareholders had challenged the buyout as “unreasonable” and “fundamentally unfair,” but two courts have now approved the buyout in less than two weeks. The decision could be appealed to the Court of Appeal for Ontario or the Supreme Court of Canada, but several of the groups that filed the lawsuit already have said they won't appeal.
Under the terms of the buyout, Stronach will receive $300 million in cash, stock worth $745 million (as of Sept. 2) and $120 million in consulting fees the next four years, in exchange for giving up control of the company.
The arrangement, which was approved by a majority of subordinate shareholders July 23, also would end the company's dual-class share structure that kept Stronach in charge of the company. Magna shares have risen roughly 25 percent since May 4, the day before Stronach announced his plan to cede control.
In 2009, Stronach will rank 31st on the overall compensation PN rankings with total pay of $1.94 million. But that excludes $8.15 million that was paid in 2009 to Stronach and several affiliated entities for consulting and other services.
The inclusion of that payment would make Magna's Stronach the highest-paid plastics industry executive in 2009 on Plastics News' top 150 chart.
Another plastics industry executive that could be the beneficiary of a large exit package is Pactiv Corp. Chairman and CEO Richard Wambold. If Wambold would lose his job in the aftermath of the $6 billion proposed sale — announced earlier this month — to Reynolds Group Holdings Ltd. of Lake Forest, Ill., he would net roughly $36 million — or more than five times his compensation in 2009.
His severance and performance-based stock awards are worth $14.6 million, according to Crain's Chicago Business. Wambold also holds stock or options on 1.41 million shares that would be worth $21.4 million in net profit at the proposed sale price of $33.24 listed in Pactiv's proxy statement.
Crain's Chicago Business calculated that four other top Pactiv executives would reap pay packages between $3.8 million and $7 million from that deal if they lose their jobs.
All five of those executives were in the top 50 percent of the PN pay rankings in 2009. Wambold ranked in the No. 5 spot with total pay of nearly $6.7 million. Net income at Pactiv rose from $246 million in 2007 to $324 million in 2009 after dipping to $217 million in 2008. But Pactiv's one-year total return to shareholders was negative 3 percent in 2009 and the firm's three-year total return was negative 12 percent.
There also were several high outgoing payouts to plastics industry executives in 2009:
* Warren Knowlton, former executive chairman and former CEO of Graham Packaging Co. Inc., more than $6.6 million. That included a $750,000 bonus for his work in facilitating the company's initial public offering. He also has the right to purchase 894,538 common shares.
* Walter Sobon, former executive vice president and chief financial officer of Constar International Inc., $412,000, including about $360,000 to satisfy a damages claim when Sobon's executive employment agreement was rejected once the company emerged from bankruptcy in November 2008.
* Fernando De Miguel, former president of Protective Packaging Europe for packaging giant Pregis Corp., a departure package in cash and stock options worth roughly $350,000.
* Doron Grosman, who joined advanced composites and carbon-fiber materials manufacturer Hexcel Corp. as president Feb. 23, 2009, and left less than six months later, received nearly $540,000 in severance and more than $1 million in equity awards upon his departure.
As described in the company's proxy, those payments stem from the executive severance package given to Grosman when he was hired.
That included a sign-on equity award valued at 200 percent of base salary, an annual equity award in 2010 valued at 150 percent of base salary and a cash target bonus award of 75 percent of salary for 2010 to be based on a full year of employment and not pro-rated for less than a full year's service.