Friday, April 30, 2010

Biglari Holdings Inc. Compensation: Begs the Question Should CEO's be Paid Like Hedge Funds?

Now this is interesting. (Especially when you consider the long-term average return on equity is 10%.)
The Incentive Bonus Agreement provides Mr. Biglari the opportunity to receive annual incentive compensation payments based on the Company’s book value growth for each fiscal year. If the Company exceeds a 5% annual book value growth hurdle, Mr. Biglari would receive an incentive compensation payment equal to 25% of the Company’s book value in excess of that hurdle. Mr. Biglari will not receive incentive compensation payments under the Incentive Bonus Agreement unless the Company’s book value exceeds a 5% annual growth rate over the Company’s previous highest book value achieved during the term of the agreement, or the “high water mark.” Accordingly, in a fiscal year where book value declines, the hurdle for subsequent fiscal years will require the complete recovery of the deficit from the last high water mark, plus a 5% annual growth rate from the last high water mark. Determinations of book value and the incentive compensation payments to Mr. Biglari under the Incentive Bonus Agreement are subject to the approval of the Governance, Compensation and Nominating Committee of the Board of Directors of the Company.