Adding up the cost of change at Great Lakes…

September 10, 2010

We’re familiar with the corporate mathematical equation —Executive change = $, but — even so — this was an especially expensive week for the shareholders of Great Lakes Dredge & Dock Corporation (GLDD). The Oak Brook, Illinois-based company (which has a second office in Qatar) provides dredging services —to maintain and deepen shipping channels, reclaim land from the ocean, and renourish storm damaged coastline.

The executive changes, announced September 7 as taking effect immediately, were explained in more detail in the 8-K and attachments the company filed the next day. In all, they will cost quite a bit, especially for a company with a $285.8 market cap.

First comes the resignation of CEO/President Douglas Mackie, whose Separation Agreement states that he and the company decided that ——it is in their mutual best interest to terminate their employment relationship. Despite his sudden resignation, Mackie’s not really leaving, though. He will remain as the —Chairman Emeritus, Executive Director and Senior Advisor to the company; his term as a director will expire at the 2011 annual shareholders’ meeting.

In exchange for giving the company a —General Release and Agreement Not to Sue, Mackie gets a lump sum check for $1,268,414 within 10 days, and another $899,640 that will be paid over 24 months, as well as health insurance for the same length of time. But there’s more. Great Lakes will also pay Mackie $365,087 (two years— worth of matching contributions to his 401(k) plan), an unspecified amount for two years— profit-sharing contributions, and tax gross-ups on both. Mackie also gets 24 months— worth of vesting credit on his Long-Term Incentive Plan awards, $26,400 for a car allowance, and office space for a year.

Mackie will also work as a consultant for Great Lakes through September 7, 2011. His Consulting Agreement states that he will get payments worth $437,500 in exchange for the duties spelled out in the agreement.

Deborah Wensel, the Senior Vice President, Chief Financial Officer, Treasurer and Secretary, also resigned this week and signed a —Consulting and Separation Agreement and General Release that will pay her $525,000 over 12 months, as well as up to 12 months of COBRA health insurance premiums and life insurance premiums. She has three months in which to exercise any vested stock options, and she’ll work as a consultant for Great Lakes until December 31, 2010.

Regarding the two new executives, both have been directors with the company since 2006, when Great Lakes merged with a subsidiary of Aldabra Acquisition Corporation. The incoming CEO, Jonathan Berger signed an Employment Agreement that pays him a base salary of $450,000 a year. Meanwhile, the Employment Agreement for Bruce Biemeck, the new president/CFO, provides him with a base salary of $425,000 a year. The company is giving each man a $250,000 bonus (half in stock, half in cash) and another grant of $50,000 in company stock within 20 days. Finally, in FY 2011 Berger will have the opportunity to earn up to $550,000 in annual incentive compensation, while Biemeck may earn up to $525,000.

In sum, Great Lakes is paying nearly $2.72 million in separation payments, hundreds of thousands for benefit plans and insurance premiums, $437,500 for a consultant’s services, and hundreds of thousands more for salaries and employment incentives for its two new executives. All in all, the drudgery of dredgery is proving pretty lucrative for Great Lakes’ executives, whether they’re coming or going.

Image source: foundphotoslj via flickr

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