The Change in Control terms for executives at Leucadia National Corp. (LUK) were already generous, but for Vice President Justin R. Wheeler, they just got a lot better.

Late last Friday afternoon, Leucadia filed this 8-K and an attached letter agreement to set out Wheeler’s new deal with the company.  According to the document, the new terms were “…intended to induce you to remain in the employ of Leucadia National Corporation.”

Frankly, why would he refuse?

Dated March 1, 2010, the agreement states that if within the next five years Wheeler continues to be an executive officer of Leucadia, but neither Ian M. Cumming (Chairman of the Board) nor Joseph S. Steinberg (president) is then serving as Leucadia’s Chief Executive Officer, then Wheeler can make a profitable departure.  If he exercises his written option to do so within six months of the stated change in control, he can terminate his employment and receive $2.5 million.  That amount can be reduced if it would subject Wheeler to Excise tax liability or if he were to act negligently or breach his duties to the company.

(Of course, if either Cumming or Steinberg leaves the company under certain circumstances between now and 2015, provisions at the bottom of p. 28 of the April, 2009 proxy obligate the company to pay each man $5.1 million. However, that is not a new disclosure.)

But even if Cumming or Steinberg don’t leave, Wheeler may get the money anyway. The second page of the letter states:

7.) At the end of the five year period from the date hereof and if a “Change of Control” has not occurred, the Board of Directors of LUK, may upon the recommendation of LUK’s Compensation Committee, choose, in its sole discretion, and based upon its evaluation of your performance during the five year period, to award you all or any portion of the Payment.

So regardless of whether the company changes hands, or whether Wheeler stays or leaves at the end of 2015, he may get $2.5 million – just to continue doing his job.

Image source:  Gala Darling

One of the challenges of reading annual reports is sifting through the massive dump of exhibits and figuring out what has been filed previously and what hasn’t. And despite what you’re probably thinking, that work isn’t always as glamorous as it sounds.

Occasionally, though, the scrutiny pays off, as it did when we reviewed the 10-K that Hess Corp. (HES) filed recently on the Friday before the big March 1 deadline.  Weighing in at a relatively modest 163 pages (compared to other companies’ 10-Ks, that is), we hummed along until we came to Exhibit 10(20), an employment offer letter from the company to Timothy Goodell.   Oddly enough, the letter is dated September 19, 2008, but for some reason it wasn’t filed with the SEC until now.

Hess Corp. hired Goodell to be its Senior Vice President, General Counsel. (Prior filings indicate that Goodell’s relationship with the company started years ago, when he worked in a private firm that did legal work for Hess.)

In addition to a base salary of $650,000, the company gave Goodell a signing bonus of $1.5 million (half of which was to be paid within 30 days of his hiring; the other half was to be paid in September, 2009). He also got a guaranteed bonus of $650,000 in 2009, as well as restricted stock and options with an approximate value of $2.25 million.

The only thing we couldn’t find was an explanation of why it took a year and a half for that contract to make its way into Hess’s filings.  But perhaps with all that paper, maybe the exhibit got lost in the shuffle?

Image source:  Brodeur

We’ve certainly picked on cruise line Carnival Corp. (CCL) and its Chairman and CEO, Micky Arison over the years for some unusual perks like Miami Heat tickets and corporate jet usage (see here and here among others). But as we were reading the company’s recent proxy, we actually came across a footnote that seemed worth spotlighting as a gold star:

Pursuant to Mr. Arison’s request Carnival Corporation donated the entire amount of Mr. Arison’s Non-Equity Incentive Plan Compensation to the following relief organizations: UNICEF, the University of Miami’s Project Medishare, American Red Cross, and Save the Children to aid in the relief efforts in Haiti following the devastating earthquake in January 2010.

What’s surprising here is that this is the type of thing a company — particularly one as media savvy as Carnival, which counts over 13,000 followers on Twitter — would tout in a press release as opposed to burying in a footnote to a proxy statement. While Carnival did put out a press release announcing a $5 million corporate donation to Haiti relief efforts back on Jan. 18 and even quoted Arison in the release, the only disclosure about Arison’s personal donation was that footnote in the proxy statement. A Carnival spokeswoman confirmed this morning that Arison’s $2.2 million donation was part of the $5 million announced in January.

If companies start burying good things in the footnotes in their routine filings, what’s next? World peace?

Image source: Carnival Cruise Lines

A lot of us like a good mystery, but most of us probably prefer the ones in a book to those in an SEC filing.

When we looked at the 10-K that Forestar Group Inc. (FOR) filed yesterday, we noticed an interesting example that illustrates an important point:  Shareholders need transparency and full disclosure in SEC filings.  And when that’s lacking, they can’t know whether the company’s executives are running the company with everyone’s interests in mind, or just their own.

On page 31, in the 2009 section under the heading “Significant aspects of our results of operations follow”, we found the following:

General and administrative expense includes about $3,200,000 paid to outside advisors regarding an evaluation by our Board of Directors of an unsolicited shareholder proposal and $2,213,000 in non-cash impairment charges related to our undivided 15 percent interest in corporate aircraft contributed to us by Temple-Inland at spin-off. Other general and administrative expenses have declined as result of execution of our near-term strategic initiatives to lower costs.

Admittedly, this is not the kind of mystery that involves deep secrets like “Who killed J.R.?”  However, we – and therefore perhaps shareholders – found ourselves wondering:  “$3.2 million to outside advisors?  Who are they? Do these advisors have a connection to anyone at the company?  Or, at a minimum, what kind of advisors are they?  What is the general nature of this ‘unsolicited shareholder proposal’?”  Was this a lame shareholder proposal, or something that really required a lot of due diligence and time to consider?

Another sentence or two to provide some context could have easily answered these questions.

When we researched the point, we discovered that Forestar actually first disclosed this expense in an 8-K filed last May.  But in the handful of documents that refer to the expense which the company has filed since then, it always uses the same phrase, with no further detail.

We understand that companies can’t reveal information that would jeopardize their competitive edge.  However, if a matter doesn’t fall into that category – as this one presumably doesn’t, since it was a shareholder proposal – then companies could use their filings as an opportunity to reassure shareholders that they value transparency and are working with their interests in mind.

So, sadly, in this case we can’t tell you Whodunnit.  Nor can we tell you why.

Update: a valued footnoted reader, Steven Friedman, gets the coveted “Sam Spade for the Day” award for helping us solve the mystery.  Thank you for helping us, Steven!  He writes:

this was the takeover offer last year. http://uk.reuters.com/article/idUKN2330853720090123

Offer was at $15 and stock is higher now so the defense money was probably good ROI for shareholder. The private jet on the other hand….oh well

Image source:  National Geographic