ShopHQ Dissidents Bash Improved Comp, Severance For CEO

ShopHQ’s dissident shareholder group lobbed another shot at the home shopping network’s current management, its CEO Keith Stewart and the compensation they are all getting paid.

As we have already written, The Clinton Group has put up its own slate to replace ShopHQ’s current board at the company’s annual meeting. Needless to say, the home shopping network has asked its shareholder to reject the upstart group’s candidates.

In a regulatory filing Monday, the dissidents took another stab at rallying stockholders to their side.

In addition to ousting Stewart, The Clinton Group is asking shareholders to nix any raises or golden parachutes for current management.

In its proxy, the dissident said, “The Company’s current $7 revenue production per home significantly lags behind that of HSN and QVC, the Company’s principal rivals, who generate $24 and $60 of revenue, respectively, per American home in which their programming is available, according to the Company’s latest Management Presentation.”

Here’s what The Clinton Group has to say about Stewart’s pay and that of his team:

Since the end of Fiscal Year 2010, the Company’s Named Executive Officers (the “NEOs”) have collected nearly $14 million in compensation, while the Company lost $78 million and the stock price has been flat. The Index, by comparison, has increased nearly 45% during this period.

The Company continues to pay for many of its senior officers and for four of its NEOs to travel from their homes to Minneapolis, in many cases more than 1000 miles, to work for the Company. Each of these Named Executive Officers have worked for the Company for many years and, in our view, should be living near the Company’s offices to dedicate sufficient time to their jobs.

By continuing to provide commuting expense reimbursement, the Board has encouraged these senior officers to remain domiciled far away from the Company’s operations and has provided no incentive for them to move. These commuting expenses also continue to grow; the expenses for three of the officers have nearly doubled in the last two years.

We are also disappointed that soon after Clinton provided notice of its intention to nominate directors to the Board, the incumbent directors significantly enhanced the employment and severance packages for the executive officers.

Among other things, the Board modified the Chief Executive Officer’s employment agreement to provide him with full vesting of all restricted stock and option awards and provide that “all performance units and other performance-based incentives shall be deemed earned at 100% of the target” upon the mere election of a new board (and even if Mr. Stewart remains in his position).

For the rest of the executive team, the Company significantly enhanced the severance arrangements – though the March 2014 Form 8-K claimed that the new severance plan merely “formalizes [then] existing guidelines” – such that the executives are now entitled to eighteen months of salary, bonus and COBRA payments (previously, the policy was for 12 months of just salary and COBRA payments) if they are terminated within 24 months (previously, the policy was 12 months) of a “change in control”, which is defined to include a significant change in the composition of the Board.

We believe these expensive, enhanced employment and severance arrangements are not in the interests of shareholders, do not align the interests of management with shareholders and serve to make it more expensive to shareholders to elect board representatives of their own selection.


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One Response to “ShopHQ Dissidents Bash Improved Comp, Severance For CEO”

  1. Angela Says:

    Perfect day to post this, Linda. It’s Tuesday so all the ex-QVC refugees will be arriving at the office today from Philly, Florida, Texas, Nantucket. Nice work if you can get it, uh??? Where’s my golden parachute? Who on earth sez ‘yes’ to these outrageous contracts? Please find out and let all of us know so we can get one like that. We deserve it more than they do!

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