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2004 FIN – Perspective: Golden Parachutes in the Fastener Industry

2004 FIN – Perspective: Golden Parachutes in the Fastener Industry
August 27
00:00 2012

 

Jeff Steiner

Jeff Steiner

September 1, 2004 FIN – The fastener industry rarely makes national headlines, but details of executive compensation packages for fastener executives have been highly visible this summer. The latest is a report from the Washington Post noting that Fairchild Corporation CEO Jeff Steiner conducted a “triple dip when the company sold Fairchild Fasteners to Alcoa in late 2002.
“Steiner received $3.1 million, part of a golden parachute from Fairchild, without bailing out,” Post reporter David Hilzenrath wrote. “He also received a $5.2 million bonus from Fairchild for his work on the deal. And he and his son Eric, president and chief operating officer, got a noncompete and consulting contract with Alcoa worth $5 million over four years. Noncompete payments are commonly made to employees with critical operations or customer knowledge, “corporate attorney John Olson told the Post. Olson said noncompetes are not typically awarded to CEOs who are primarily investors, financiers or turnaround specialists.
During the same year Fairchild sold its fastener operations, Steiner received $2.5 million in salary, a $1.7 million advance on retirement pay (even though he has announced no plans to retire), and such other perks as chartered aircraft and an apartment in Paris.
In 2002 Steiner reportedly accepted an additional $3 million in advance retirement payments. Fairchild also shelled out $5 million to cover Steiner’s legal expenses related to a criminal conviction for “unjustified use of a French oil company’s funds in 1990. These multimillion-dollar payments flowed into Steiner’s bank account during a time when Fairchild reported a loss of $53.2 million in the fiscal year that ended June 30, 2003, and had lost money in three of the four previous years. James Cox, a professor of corporate law at Duke University, labeled Steiner’s arrangements “shameless overreaching” and “a raid on the Fairchild treasury. “Where was the board and what were they smoking?” Cox quipped.
Execs With the Midas Touch
Steiner is not the only fastener executive to receive lucrative ‘change of control payments” in recent months. When Distribution Dynamics Inc. was purchased during a bankruptcy auction this summer, CEO Dominic Polimeni reportedly received more than $1.4 million in “key employee retention program bonus payments despite having been with the company for only a few months.
According to court records, the DDI payment was structured so that Polimeni would be compensated even if suppliers, who were owed millions, did not receive a penny from the sale. Considering that Polimeni had worked for DDI only since the fall of 2003 and continued to receive his annual compensation package, a group of unsecured vendors claimed the bonus was “excessive.”
Prominent fastener suppliers owed money by DDI included Textron Fastening Systems, Porteous Fastener Co., SPS Technologies and Heads & Threads International.
Polimeni was head of Questron Technologies  – a rollup of successful fastener distributorships –  when Questron went bankrupt and was subsequently sold to GE to form GE Supply Logistics. Terms of that deal left Questron shareholders empty handed, including distributors who had sold the businesses they built to Questron.

Fastener executive compensation also made headlines in early August when Ivaco Inc. was acquired by Heico Cos. for $285 million in bankruptcy proceedings.
Investor Yves Beaudoin complained to the Toronto Star that former CEO Paul Ivanier and senior vice president Sidney Ivanier had engaged in “questionable practices while the family-controlled company plunged into financial ruin. Even in the difficult years, [they] continued to pay themselves [CAD] $5 million a year in salaries,” Beaudoin stated. “It’s a sad story, which ended badly for shareholders.”
Brighter days may be ahead for Ivaco, however. The company reported strong earnings and profit for the second quarter of 2004. And current CEO Gordon Silverman received a vote of confidence from Heico president El Roskovensky. “I think current management has done a good job, Roskovensky told the Globe and Mail. “They’re navigating their way through this process, and the business is going along quite nicely. ©2004/2012 Fastener Industry News.
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