Wednesday, July 09, 2008

Say 'Thank You' to Consolidated Graphics CEO Davis!

The Board of Consolidated Graphics (CGX-$49.46) approved a new severance package for Chief Executive Joe R Davis that ups his lump sum salary payment in a change-in-control scenario at the national provider of commercial printing services from an amount which previously provided for recompense equal to three times annual base salary to a new agreement calling for payment of ten times base salary of $750,000, which works out to $7.5 million! In essence, Mr. Davis, 65, who founded the printing company in 1985, is being rewarded with a ten-year employment contract, according to the Proxy Statement filed on July 3 with the SEC.

In addition, if Davis resigns without good reason—spend more time with the family excuse—he would still be entitled to payment of his annual base salary through May 22, 2018.

Imma definitely do my best to reach out (to the kids).
Homies on the block,(citizens)
Hustlers on lock,(what it is)
The music biz won't stop or change me.

For the year ended March 31, 2008, the company reported record sales and share-net of $1.1 billion and $4.63, respectively. Some might argue that Davis is due his just desserts—growing through acquisitions over 23 years a sizeable commercial printing operation supporting 70 shops, with a geographic footprint located in 27 states.

In our view, Davis’ 9.9% investment stake, worth about $60 million, already addresses any outstanding 'thank you' owed to him.

East coast (I want to thank you).
West coast, uh huh (I want to thank you).
(I owe it all to ya'll).
Dirty south I want to thank you(oh)
Midwest (stay up cuz i just wanna thank all yall)
(yeahy yeahy)
~ U.S. R&B singer Chris Brown,
"Thank You" YouTube video

Davis is also sitting on more than $3.1 million in incentive equity compensation owed to him that he has yet to exercise.

The Board further believes that additional change in control benefits eliminate, or at least would reduce, their [executive officers] reluctance to pursue potential solicitation offers that would be in the best interests of common stockholders. The 10Q Detective does not debate the merits of certain ancillary severance benefits, such as assurance of bonuses owed or interim health and life insurance benefits following separation from the company.

The revised change in control agreement with Davis, however, provides him with an estimated $3.5 million tax gross-up. Unless the Board plans on paying the capital gains taxes owed by all shareholders—tell us again how this clause aligns the interests of Davis with other shareholders?

Editor David J. Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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