Transaction bonuses are bad incentive

Last month’s purchase of I-trax Inc. by drugstore giant Walgreen Co. will trigger more than $1 million in bonuses for six top executives of the Chadds Ford company.

I-trax chairman Frank Martin will receive the largest bonus - $400,480 - once the purchase has been completed, according to a filing with the Securities and Exchange Commission. CEO R. Dixon Thayer will get $193,120.

Walgreen agreed to buy the operator of worksite-based health clinics on March 14 for $278 million, or $5.40 per share.

These payments are called “transaction bonuses” and get paid only if the deal gets done. They’re common and are usually a bad idea. Executives should be rewarded for managing and improving a company, not selling it.

Losing hand

The bottom line for Atlantic City’s casinos in 2007 was filled with red ink.

The 11 casinos there collectively reported a net loss of $59.7 million for the year compared with net income of $374.9 million in 2006, according to a quarterly report released by the New Jersey Casino Control Commission.

The losses were result of non-cash write-offs at several casinos, the commission said.

The gambling industry likes to focus on the gross operating profit line on the income statement. Even that view isn’t pretty. The casinos’ operating profit was down 9.6 percent for the year.

Together, they produced operating profit of $1.25 billion on revenue of $4.82 billion in 2007. The year before, they generated $1.38 billion in operating profit on revenue of $4.93 billion.


“A recession is a technical term. I’m not yet ready to say whether or not the U.S. economy will face such a situation.”

- Ben Bernanke, Federal Reserve chairman testifying before Congress Wednesday.