My stockholder’s proxy package arrived in the mail today for Brookline Bancorp (BRKL), one of my few individual stock holdings. The first page of the annual report has a smiling CEO, Paul Perrault, proudly reporting that for 2011 net income was up by 3 percent over 2010 (to a total of $27.6 million). Why was the guy smiling so broadly after turning in such a lackluster performance? Buried in the proxy materials was the fact that his own salary grew by 48 percent over 2010 (to a total of $1.56 million). I.e., if operating profits and CEO pay at BRKL keep growing as they have, the CEO’s compensation will exceed the total operating profit of the enterprise starting in 2019.
In theory the shareholders are supposed to vote on whether or not the Board of Directors have come up with a reasonable plan for 2012 executive compensation. However, the materials distributed with the proxy all relate to 2011 pay. We will have to wait until 2013 to find out exactly how much Mr. Perrault gets.
How good a job does the 60-year-old Mr. Perrault need to do in order to get paid? The standards turn out not to be that exacting. If the guy becomes disabled he gets at least a year of salary. “In the event of death, Mr. Perrault’s estate, legal representatives, or beneficiaries shall be paid his Base Salary for a period of one year form the date of his death.” So the shareholders of BRKL are unwittingly in the disability and life insurance business.
How are the shareholders doing? Going back 10 years in Google Finance shows that BRKL is down 19 percent. The Dow Jones went up 27 percent during the same period. The Nasdaq was up 71 percent.
Given the long list of recent bank failures, perhaps this CEO should be paid more. ;-P
It’s par for the course, Phil.
Where I live (southern VA) there is a small bank that has four locations total, is in all sorts of trouble with state banking regulators and has suffered massive loan losses in commercial real estate due to a slew of loans against at least highly speculative if not down-right dubious real estate projects, yet it’s CEO makes a total of nearly $600,000 per year.
Now contrast that with another local bank that boasts robust earnings, impressively low loan losses and that has over 100 locations in North Carolina and Virginia but whose CEO makes less than $350,000 per year.
I will let you guess which bank has a large, hands-on, active board versus the other bank whose board consists of friends and golfing pals of it’s CEO.
PS
I recall bankers screaming about investors who were shorting their stocks heavily in 2008 and the SEC agreeing to halt that practice “to protect investors” in the interim.
I’ve always wondered to which “investors” they were alluding?
It’s really not all bad, Phil. The disability and death stuff that you describe is standard fare for a CEO of a small company.
Your bank figures that the likelihood of their CEO dying or becoming disabled while he’s in their employ is relatively low, so their electing to offer a year’s salary IF he dies or becomes disabled while he is a bank employee is not a bad move, actually. So they’re really not in the disability or life insurance business.
His salary does sound a bit extreme, though. I’d bet he’s had the same board for a long time.
The SEC banned short selling of big bank stocks during the financial crisis in 2008 to presumably assist banks against rogue investors. It was just another move from the Federal government to assist what presumably is a private enterprise. I guess they were thought of as simply too big to fail. ))