Feb. 6 must have been really busy for top bosses at Duratek, the Columbia radioactive-waste disposal company.
They signed new "golden parachute" deals that would pay them big money just in case Duratek got sold to another company and they lost their jobs.
Then their board agreed to sell Duratek to another company - EnergySolutions of Salt Lake City - although Duratek's biggest shareholder turned out to hate the deal.
Potential ... and fruition. Wishes ... and fulfillment. All by the close of business Feb. 6. The heck with magic carpets; Aladdin has a better ride that floats through the sky.
Golden parachutes have been described as job insurance for top executives. In a day when corporations often get gobbled up by rivals, the thinking goes, bosses need extra protections so they won't reject a takeover beneficial to shareholders just to protect their jobs.
But the Duratek insurance is like being able to buy a storm policy the moment the hurricane blows your roof off.
Where golden parachutes once were theoretical, contingent propositions, more and more they look like opportunistic piling-on, struck when takeover deals are already in sight. Maybe they're even becoming routine merger paperwork.
Duratek is the second Maryland company in recent months to grant nice parachutes just before agreeing to a merger transaction that would potentially trigger them.
At Constellation
Baltimore's Constellation Energy renegotiated a parachute for honcho Mayo A. Shattuck III three times while it eyed a marriage with FPL Group, which was announced Dec. 19. As a result Shattuck stands to get what I figured to be easily $40 million in merger-related pay, plus many millions more he would have gotten any- way.
The Duratek parachutes, to be fair, are nowhere near so fabulous.
The Feb. 6 deal would pay Duratek CEO Robert E. Prince and Executive Vice President Robert F. Shawver twice their annual salary and bonus under most severance scenarios in the wake of a merger.
Based on 2004 compensation, the most recent disclosed, that would come to about $1 million for Prince and about $600,000 for Shawver.
Other, lower-level executives would get retention bonuses of $60,000 and the prospect of 12 months' severance if their jobs disappear. Pretty basic stuff. Even fanatical consumer and shareholder activists don't usually get excited until parachutes exceed three times annual pay.
But why did Duratek grant parachutes the same day the merger agreement was signed?
For Prince and Shawver, "those agreements were originally put in place in 1995," said Diane Brown, Duratek's director of investor relations. "So they were not new agreements, but they were updated to be more in line with the market today."
And the link to the merger?
"Just a coincidence on timing," she said. "Those updates for Mr. Prince and Mr. Shawver would have been done regardless."
Agreements for other executives, she said, were necessary to retain them in the face of merger uncertainty.
"Certainly the company doesn't want its key employees to leave based on a pending merger," Brown said.
EnergySolutions, she said, knew and approved of the Feb. 6 executive deals, which an EnergySolutions spokesman confirms.
Atypical practice
It is not common for companies to grant or upgrade parachutes at the 11th hour of a merger deal, said Richard L. Alpern, a lawyer and executive pay consultant for Frederic W. Cook & Co. in New York.
"But," he added, "I think it's appropriate when they examine the situation and they find something is not competitive" with what other executives get. Sometimes, Alpern said, "the company hasn't looked at their agreements in a long time and they discover to their shock that they think there's something missing from it."
OK, but the whole point of parachutes and other big pay is to give executives incentive to do right by shareholders.
Duratek's biggest (13 percent) shareholder, Tontine Capital Partners' Jeffrey L. Gendell, is livid that the $22-a-share Duratek has accepted from EnergySolutions is more than $6 below what the stock sold for a year ago. In a letter to Duratek, he promised to "strenuously oppose efforts to consummate the transaction on its current terms."
If parachutes have reduced executives' resistance to doing even subpar mergers, that's another reason for shareholders to regret them.
jay.hancock@baltsun.com
