Summer tends to be a slow time for business in so many ways. There’s more action at seaside than at the C-level, including changes in chief executive officers.
CEO turnover in July was at its lowest level in 16 months, according to a monthly scorecard kept by the Chicago outplacement firm Challenger, Gray & Christmas Inc.
There were just 88 CEO changes in July compared with 126 in the same month a year ago. And Challenger Gray says that in three of the last five years, CEO turnover has been lower in July than the annual average.
That said, August has seen some high-profile CEO changes at Hewlett-Packard Co., Sara Lee Corp., and General Motors Co. Two companies locally made a switch: Kulicke & Soffa Industries Inc. (expected) and American Water Works Co. Inc. (unexpected).
Voorhees-based American Water Works named Jeffrey E. Sterba as its new chief executive last Monday. Fort Washington-based Kulicke & Soffa picked Bruno Guilmart as its CEO Aug. 6.
As often happens, the news release announcing the new top dog came out one day, and the regulatory filings that disclose the kibble spread around to bring those puppies home appeared a bit later. Documents filed with the Securities and Exchange Commission show that companies continue to offer prime cuts rather than meat byproducts to lure a CEO in from the outside.
Sterba, 55, will receive an annual base salary of $675,000 to run American Water Works, which has a market capitalization of $3.86 billion. That’s lower than the $847,000 salary he was receiving as head of PNM Resources Inc., a New Mexico electricity generator and supplier. But it’s also higher than the $588,000 salary of Donald L. Correll, who resigned after four years as CEO.
Besides participating in the usual bonus and incentive compensation plans, Sterba also received a cash signing bonus of $200,000 and a grant of stock options to buy 25,000 shares of American Water common stock at an exercise price of $22.66 a share.
At Kulicke & Soffa, a maker of semiconductor assembly equipment with a market cap of $432 million, Guilmart, 49, will get a base salary of $615,000 once he starts Sept. 30. That is the same amount he had been getting to run Oregon’s Lattice Semiconductor Corp. since he joined as CEO in July 2008.
For the fiscal year ended Sept. 30, CEO C. Scott Kulicke had a salary of $478,076. (His pay reflected a 20 percent cut that he received between February and August 2009 as part of an array of moves the technology company made to slash costs during the global economic downturn.)
Guilmart is not getting a signing bonus, but what Kulicke & Soffa calls a “Singapore assignment bonus,” because that’s where its new CEO will be based. Guilmart receives a cash payment of $726,000 on Jan. 3, 2011.
Also as part of his hiring, the company will award Guilmart two grants of restricted stock units on Oct. 1: 75,000 units, which will vest immediately; and 428,965 units that will vest by one-third over each of the next three years.
However, like guaranteed contracts in professional sports where some teams wind up paying multiple salaries to current and former managers, separation agreements mean corporations often continue to pay long after a previous CEO has walked away.
Under a separation agreement with American Water Works, Correll, 59, will continue to receive his base salary until Feb. 16, 2011. For the 18 months after Feb. 17, 2011, he will receive severance payments of $49,000 per month. That adds up to $1.18 million in cash.
In addition, he will get 75 percent of his annual bonus for 2010 pretty much immediately. The company also accelerated the vesting of stock options and restricted stock units he had been previously granted.
Chalk it all up to the high cost of saying “hello” to a new boss and “goodbye” to the old one.