Schnitzer Steel Pays Ex-CEO’s Legal Fees, a $2.6 Million Bonus
By Brent Hunsberger, The Oregonian, Portland, Ore.
Jan. 4–Schnitzer Steel Industries Inc. paid former chief executive Robert Philip a $2.6 million bonus last year and advanced him more than $410,000 for legal expenses related to an ongoing federal investigation, the company disclosed last week.
Philip, who resigned in May, received the bonus on top of his $494,846 salary for nine months’ work during the company’s last fiscal year, which ended Aug. 31, according to a proxy filed with the U.S. Securities and Exchange Commission.
The U.S. Department of Justice and the SEC are investigating the company’s past practice of paying improper commissions to purchasing managers in Asia, which came to light during Philip’s tenure. The company’s board launched its own investigation into the practice in late 2004.
Schnitzer Steel said it advanced Philip legal expenses related to the investigations at his request, according to the proxy. The company’s bylaws require it to protect current and former directors from losing personal assets in work-related lawsuits, and to front expenses for pending or threatened legal proceedings, the proxy said.
Schnitzer spokesman Tom Zelenka said Philip received a bonus “according to what had already been established” under the company’s “economic value added” bonus plan, a measure of after-tax operating profit. Schnitzer reported record revenues and net earnings in each of its past three fiscal years.
According to the proxy, about $1.2 million of Philip’s payment was related to the company’s 2005 performance. The remaining $1.4 million had accumulated in his “bonus bank” and was owed him at retirement, the proxy said.
Paul Hodgson, a senior analyst with corporate governance watchdog The Corporate Library, said some companies under investigation for wrongdoing will delay bonus payments until an investigation is finished.
“(Philip) may have been able to challenge that in court, but at least the shareholders would’ve said the company’s board members are sticking up for us, because that is their job,” Hodgson said.
Zelenka declined further comment on Philip’s legal fees.
In an unrelated announcement last week, Schnitzer Steel also asked shareholders to approve two new members to its board — Judi Johansen, outgoing PacifiCorp chief executive, and Mark L. Palmquist, an executive vice president overseeing grain-related businesses at Minneapolis-based CHS Inc.
The company had previously said it would expand its eight-member board, half composed of Schnitzer family members, to make its composition mostly independent. The company’s annual board meeting is Jan. 30.
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