More than a month after winning a proxy contest involving Quigley Corp., Ted Karkus has now been named chief executive officer of the Doylestown maker of Cold-Eeze cold remedies.

Karkus, a New York investor, successfully led an effort to replace the entire board of Quigley this spring. That victory led company founder Guy Quigley to resign. Karkus had been interim CEO since June 12; he's also chairman of the board.

As CEO, Karkus will earn a salary of $750,000, plus benefits.

The company also hired a chief operating officer, Robert V. Cuddihy Jr. Most recently, he's been the president of a New York City-area company that advises on financial restructuring and mergers. Cuddihy had been chief financial officer of iDNA Inc., a New York strategic communications and technology firm, for eight years.

Cuddihy's salary will be $275,000. He also will receive an annual grant of $50,000 in Quigley common stock.

A statement released by the company this morning says that Quigley has cut overall annual payroll expense by about $1.75 million, even after hiring Karkus and Cuddihy. That was accomplished by "recent resignations of senior executives and further reductions of head count."

In trading early today, Quigley shares were down 7.5 cents, or 2.3 percent, to $3.18.

The Treasury Department wants to bring more independence and democracy to the practice of paying CEOs and senior executives.

On Thursday, the federal agency said it would seek congressional approval for two measures. One would require all public companies to provide for a non-binding shareholder vote on executive pay starting in 2010.

The other would require the compensation committees of corporate boards to hire their own experts to advise them on pay levels. It’s not enough, said Gene Sperling, counselor to Treasury Secretary Timothy Geithner, to be independent in name only.

Just as the Sarbanes-Oxley corporate governance law mandated independence of the board’s audit committee, so too does the compensation committee need to be free from undue influence by the CEO, Sperling said.

To that end, a director who serves on a comp committee can’t have any financial conflicts with management. For example, the New York Stock Exchange considers a director independent even if he runs a company that does up to a $1 million in business with the corporation on whose board he sits. Treasury says that has to stop. (Here's a link to the NYSE's corporate governance rules.)

The Obama administration is not calling for a cap on compensation or limiting the manner in which executives get paid. Rather, it intends to rely on the power of embarrassment. Managements don’t want to lose shareholder votes on their pay packages, even if they’re nonbinding.

When they do lose, corporations will change their compensation policies. Treasury cited GlaxoSmithKline P.L.C. as having acknowledged a “major shift” when it lost such a vote in 2003.

There have been few shareholder revolts over pay packages under the United Kingdom system, on which the Treasury’s recommendations are based. But the annual votes have forced companies to be more explicit with investors on how they pay executives and why.

I’m all for greater disclosure and shareholder engagement. Too many of us don’t even look at our proxy statements, much less cast votes.

And I’d rather have good legislation than fast legislation. But in a summer where Washington is rushing to overhaul financial regulation and change health-care coverage, this looks like an easy vote for lawmakers to defend before the voters.

Good chief financial officers are worth every penny if they can keep their enterprises humming through recessions and credit crises.

Judging by what some newly hired CFOs are earning, they’re commanding quite a few pennies.

Brian P. MacDonald, introduced on Tuesday as Sunoco Inc.’s new CFO, will get an annual salary of $650,000, according to an offer letter filed with the Securities and Exchange Commission.

In contrast, Sunoco’s last permanent CFO, Thomas W. Hofmann, had a base salary of $570,000 for 2008.

MacDonald also will be eligible for a cash bonus of 80 percent of his salary, or $520,000. Plus, Sunoco will pay a cash award of $300,000 on the first payday after his hire date and a second award of $400,000 on the six-month anniversary of his employment.

As long as the compensation committee approves, the oil refiner and marketer intends to award him restricted share units worth $2.2 million on Aug. 31. (Those won’t vest for three years.)

In addition, MacDonald will get equity grants worth $1.7 million on Aug. 31 and other grants worth $1.6 million next March.

Add it all up, and I get $7.37 million (excluding benefits) to lure MacDonald away from Dell Inc. , where he was CFO for its commercial business unit.

That’s a lot of money, but not out of line with what other CFOs are making. According to Equilar Inc., a research firm that focuses on compensation, the median salary for a CFO that’s worked for a large public company for at least two years was $532,758 in 2008.

Other local companies have paid up to attract CFOs.

Endo Pharmaceuticals Holdings Inc., the Chadds Ford maker of pain medications, named Alan G. Levin as its CFO as of June 1. Levin, 47, will get a salary of $600,000, an annual cash performance bonus of up to 200 percent of his salary, 80,000 stock options, 43,500 restricted stock units, and a $225,000 one-time cash bonus.

Levin, a former Pfizer Inc. executive, succeeded Charles A. Rowland, who resigned Sept. 2. Rowland’s base salary for 2008 was $468,000.

B. Craig Owens joined Campbell Soup Co. as CFO on Oct. 6 at a salary of $780,000. Previous CFO Robert Schiffner, who resigned on Aug. 1, had a base salary of $525,000.
 

Repeat after me: The Obama administration will not cap executive compensation and will not tell companies how to pay their senior managers.

That is, it won’t unless your company got financial help through one of the federal government’s alphabet-soup bailout programs. Those who took multibillions of dollars will have to answer a federal “compensation czar.”

And in general, isn’t that how it should be?

If you smashed up a perfectly good company and got public money to patch it up, it should be costly and uncomfortable for you to regain the right to take it back onto the open highway of the free market.

But if you’re a company that’s been whipsawed by the recession, the last thing you need is for the government to limit what you can pay your CEO, CFO or other C-level exec.

So give Treasury Secretary Timothy Geithner credit for his plain talk yesterday: “We are not capping pay. We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive.” (See story on D3.)

That doesn’t mean corporate America has danced away from changes in how executives are paid. Or that everyone is thrilled with all of the compensation-related provisions outlined by Geithner yesterday.

While applauding the administration for not mandating pay caps, one Philadelphia attorney who works with a lot of compensation committees panned a renewed push for nonbinding “say on pay” votes by shareholders.

John Martini, the head of Reed Smith L.L.P.’s Tax, Benefits and Wealth Planning practice group, said that most shareholders are “not equipped to make good decisions” on pay. Politicians may be pressing to import this practice from the United Kingdom, but Martini said he doesn’t see a groundswell of support from shareholders.

Irv Becker, national practice leader for the executive compensation practice of Philadelphia’s Hay Group, applauded the federal encouragement of performance-based pay. More companies are doing just that, he said.

One local example he cited was Campbell Soup Co., which pays its top people with 100 percent “performance-vested” plans. Seventy percent of their incentive compensation is paid in restricted stock based on total shareholder return. The rest is paid in restricted stock based on earnings-per-share targets.

Comcast Corp. and Cigna Corp. pay their top managers using about 50 percent performance-vested plans. The other half of their incentive pay comes from stock options, Becker said.

In general, Becker welcomed Treasury’s focus on compensation principles rather than outright rules, which can spawn unintended consequences.

Still, some gray areas will need to be addressed. Compensation committees will now have to factor “risk assessment” into how they pay executives, which they largely have not done, Becker said. Congress has been critical of incentives that seem to have encouraged reckless behavior.

And matching compensation to a “time horizon of performance” will be very challenging for complex organizations in which different business units represent different degrees of risk, he said.

If the Sarbanes-Oxley Act of 2002 mandated the audit committees of boards of directors to assert their independence, that’s what new legislation the Obama administration intends to do for compensation committees.

Anything that prods board members to be more independent is to be applauded, said John A. Pearce II, management professor at the Villanova School of Business. He called the performance of the boards of the biggest bailout banks “shameless.” They “showed no awareness to the dangers to which their busineses were exposed,” he said.

Felix Zandman will be paid $60 million for his intellectual property contributions to the company he founded in 1962, electronic component maker Vishay Intertechnology Inc. of Malvern. (David Swanson / Staff Photographer)

Depending on how you look at it, the founder of Vishay Intertechnology Inc. either saved his company $310 million to $385 million or will cost it $60 million over the next five years.

It all turns on a provision in the previous employment agreement of Felix Zandman. Vishay had wanted to make sure he’d be compensated in the event of termination, because of the intellectual property he has contributed since founding the Malvern electronic-components maker 47 years ago.

But I might call it a “legacy cost.” Certainly, it’s different from the burdens of health-care and other benefits promised workers that have contributed to the restructuring of the U.S. steel and auto industries.

However, this promise, made 24 years ago, is also costly and certainly became a concern to Vishay.

The story of Felix Zandman is a compelling one.

Born in Poland in 1927 and a survivor of the Holocaust, he emigrated to the United States in 1956 and became director of research at the Budd Co. in Philadelphia. In 1962, he started Vishay, creating and developing many of the core technologies that it eventually used in its products, such as resistors. Today, it is one of the dominant companies in its sector.

In its most recent Form 10-K, Vishay estimates that $1.7 billion of its $2.8 billion in 2008 sales could be attributed directly to Zandman’s inventions.

Zandman’s previous employment agreement with Vishay called for him to receive royalty payments on those sales for 10 years following his termination for certain reasons.

The agreement would have paid him 5 percent of the gross sales of those products. In 2007, Vishay hired a consultant to evaluate how much that might cost the company. The “present value” of the royalty was estimated to be between $370 million and $445 million had he been terminated as of Dec. 31.

“The possible consequences of this contingent liability for potential strategic alternatives available to the Company were deemed of particular concern at this time in light of the unprecedented disruption now being experienced in the global markets,” states a supplement to Vishay’s proxy statement filed with the Securities and Exchange Commission.

And perhaps the wide ramifications of the royalty deal could not have been foreseen when it was included Zandman’s original employment agreement signed in March 1985, when Vishay’s sales were $56.5 million.

In December, Zandman approached Vishay’s compensation committee with a proposal to restate his employment agreement, according to the filing. This week, they agreed to drop the royalty payments in exchange for paying the founder $60 million over the next five years.

Vishay paid Zandman $10 million on Wednesday. Subsequent $10 million payments will be made each year on the same date.

Zandman would not receive any additional payments if he were to terminate his employment “without good reason” or if he were terminated “for cause,” the filing states.

And while no one can deny his substantial accomplishments as an inventor and entrepreneur, there’s bound to be some grumbling from shareholders about the additional payment at the annual meeting on May 26.

Like many technology companies, Vishay got smacked by the global recession in 2008. It lost $1.73 billion, or $9.29 per share, last year, compared with net income of $130.8 million, or 69 cents per share, in 2007.

Investors who saw their Vishay shares fall 45 percent over the last year may not be in a nostalgic mood.

This will be a busy week for annual shareholder meetings in the region.

Tasty Baking Co. kicks it off today with an annual meeting, not at its new headquarters in the Navy Yard in South Philadelphia, but at the Union League of Philadelphia at 11 a.m.

There’s nothing at all controversial on the Tastykake maker’s proxy ballot. Elections of directors are practically automatic. However, president and CEO Charles P. Pizzi is up for election as a director. With Pizzi in his seventh year as CEO and the company’s stock price down 46 percent during his tenure, it’ll be interesting to see if shareholders send any message with their votes.

Two drug companies, Adolor Corp. and Cephalon Inc., hold their annual meetings tomorrow, as does Bala Cynwyd-based radio-station operator Entercom Communications Corp.

The splashiest meeting (if you can call any shareholder gathering that) will happen on Wednesday, when Comcast Corp. takes over the Convention Center, starting at 9 a.m.

The agenda is long, featuring company proposals that would amend three incentive compensation programs as well as four shareholder-sponsored proposals. One seeks to end Comcast’s dual-class voting structure. Another wants the board of directors to subject any future “golden coffin” compensation measures to a shareholder vote. A third proposal would require Comcast to identify all executive officers who make more than $500,000 in base salary. And the last seeks to win shareholders a “say on pay,” an advisory vote on how top management is compensated.

Wednesday also brings shareholder meetings for Quaker Chemical Corp. and Radian Group Inc., two companies in the hard-hit industries of chemicals and financial services.

Lincoln National Corp. will hold its annual meeting at the Ritz-Carlton Philadelphia Thursday at 9 a.m. Like other life insurers, the Radnor company has seen its stock price careen wildly as it copes with declines in its investments.

Finally, K-Tron International Inc. continues its practice of moving its shareholders meeting to places where it has operations. On Thursday, the material-handling equipment maker will trade Pitman, N.J., for Greenville, S.C.
 

An update on one of the many “say on pay” votes by shareholders on the compensation of corporate executives.

Verizon Communications Inc. shareholders voted 90 percent in favor of the “overall executive pay-for-performance compensation policies and procedures” at the phone company’s annual meeting Thursday in Louisville, Ky.

Unlike other annual meetings this spring where shareholders have been seeking to win what’s called a “say on pay,” Verizon shareholders actually had their first opportunity to vote on the company’s executive compensation practices.

Verizon had sent its shareholders several letters detailing how it pays its top people as well as changes it’s made to perks. For example, CEO Ivan Seidenberg will be allowed to use company aircraft for personal use during his retirement, but his successor won’t.

So Verizon’s “campaign literature” may have done the trick in winning overwhelming support. It’s a reminder that winning the right to vote on pay practices doesn’t mean shareholders automatically will vote down plans that produced total compensation of $18.6 million for Seidenberg last year.

Still, any vote on pay is progress. A group of retirees from Verizon and its phone-company predecessors has campaigned for changes in corporate governance at the New York-based company for years. This year, the Association of BellTel Retirees had sponsored an effort to prohibit the CEO from also serving as chairman of the board.

That measure did not ring a bell with other shareholders. So Seidenberg will remain as chairman.

Three other shareholder-sponsored measures also were defeated. However, one resolution did pass. It asks the board to change the company bylaws to permit the holders of 10 percent of all Verizon shares to call a special meeting. Currently, that threshold is 25 percent.

Verizon’s board said it will take the outcome of the shareholder vote under advisement as it reviews corporate governance practices.

DuPont Co. shareholders will be asked to vote on only one stockholder-sponsored resolution today compared with five last year.

The chemical giant will once again hold its annual meeting at the DuPont Theatre, 1007 Market St., Wilmington, at 10:30 a.m.

The lone shareholder resolution seeks to give shareholders a “say on pay” on how DuPont compensates its top management. A similar measure in last year’s proxy statement did not pass.

DuPont reported that the 2008 say-on-pay resolution received 275.2 million votes “for,” 344.5 million “against” and 25.9 million “absentions.”

(To find the results of proxy voting, check the Form 10-Q document that follows a company’s annual meeting. Usually, you’ll find a breakdown of the vote totals below the quarterly financials.)

Last year, DuPont faced proposals to separate the positions of chairman and CEO, to require a global warming report, to amend the company’s human rights policy, and to create a committee to focus on the impact on communities of plant closures. None of them passed, and none will be on the ballot today.

It’s pretty routine for companies to oppose shareholdersponsored resolutions, and DuPont is recommending investors vote against this year’s say-on-pay measure sponsored by William Steiner, of Piermont, N.Y., who owns 3,300 DuPont shares.

Even though management tends to prevail, these votes are no longer the slam dunks they once were.

Shareholders of Apple Inc. just won the right to vote on the pay of the executives named in its proxy. The measure was approved by 52 percent of the votes cast.

More meetings

Speaking of annual shareholder meetings, three others are being held today:

* EResearchTechnology Inc., the Philadelphia provider of cardiac safety products and services for clinical trials, at its corporate headquarters at 1818 Market St., Philadelphia, at 10 a.m.

* TF Financial Corp., the Newtown bank holding company, at Holy Family University in Newtown at 9:30 a.m.

* USA Technologies Inc., the Malvern provider of vending machine technology, at the Chester Valley Golf Club in Malvern at 10 a.m.

A few days after hiring its new CEO, Charming Shoppes Inc. has disclosed what it’s paying James Fogarty.

And while the pay isn’t outlandish by AIG or Merrill Lynch standards, it’s clear that it still takes a lot of financial inducement to attract a CEO, even in a lousy economy.

In fact, while Fogarty’s compensation package would appear to be less than Charming Shoppes’ last CEO, Dorrit J. Bern, it would be a stretch to call him a bargain.

Fogarty’s background is as a turnaround manager and the Bensalem women’s apparel retailer has been in full restructuring mode since Bern resigned as CEO last July following a months-long battle with activist investors. In part, they were critical of Bern’s pay package.

Bern’s salary in 2008 was $1.25 million. That rose to $1.55 million under a new employment agreement. The new contract sought to tie more of her pay to company performance and cut some perquisites she’d received, such as a rent-free apartment on Rittenhouse Square.

Fogarty, 40, will get a salary of $1 million and an annual bonus of up to $1.5 million. He’ll also be eligible to participate in a long-term incentive plan in 2011.

And on April 2, he received a “welcome” equity grant of 2 million stock appreciation rights, which vest over four years. Based on the closing price of $1.82 for Charming Shoppes stock on that date, that’s a $3.64 million base value.

No rent-free apartment for Fogarty, but he’ll have 12 months to relocate from New York. So the company will pay for temporary living and commuting expenses.

Still, even when he was running American Italian Pasta Co., Fogarty did not work for food. Until January 2008, he served as CEO of the publicly held pasta maker, on assignment by his employer, Alvarez & Marsal, a top restructuring firm.

Alvarez & Marsal received a total of $3.5 million for its services. A breakdown of those fees in American Italian Pasta’s proxy statement shows it paid the firm $600 per hour for “the services of Mr. Fogarty.”

Maybe Charming Shoppes got a deal, after all. If there are 52 weeks in a year and 40 hours in a workweek, Fogarty’s $1 million salary translates into $481 per hour.

Nah, that’s still a lot of linguine.