Another institutional investor has joined the fray in the proxy battle at Georgia's largest thrift company - Bankers First Corp. - criticizing a company program that allows nine senior executives to buy stock with interest-free loans.
Selective Investors Partnership, which owns less than 1% of the company's stock, has proposed that the thrift's officers be prohibited from using the interest-free stock loan program and that all past loans should be repaid as soon as possible.
"There's no way they can justify it in my mind," said Isadore E. Lourie, managing partner of Selective Investors of Columbia, S.C. "That certain officers can obtain interest-free loans to buy stock at below-market value and draw dividends on that stock, that just struck me as being unfair."
The program, which was implemented in 1987, is being used by all nine eligible officers. To date, the company has issued $1.4 million in outstanding loans for the officers to buy stock, the thrift said.
The question is one of five shareholder proposals to be voted on at the $1.1 billion-asset company's May 10 stockholders' meeting. The meeting was originally scheduled for next week, but was postponed after the proxy battle began several weeks ago.
The proxy fight is being waged by Mid-Atlantic Investors, also of Columbia, which has made a name for itself in recent years for speculating on thrifts and banks in the Southeast and steering them toward mergers.
In addition to supporting Mr. Lourie's proposal, Mid-Atlantic, which controls 9.4% of Bankers First stock, wants shareholders to vote for selling the company, requiring shareholder approval for "golden parachutes" and any salaries over $200,000, and putting a Mid-Atlantic nominee to the board.
The stock option loan program allows a Bankers First officer to acquire company stock through an interest-free loan from the company, using the acquired stock as collateral. The participants are not required to pay back the loans for 10 years.
Selective Investors argues in the proxy statement that these officers receive the same voting rights and dividends as the shareholders who have paid for their stock, yet have no money at risk. In addition, the program prevents the company from benefiting from the capital that would have been raised if the stock had been purchased, it said.
"At this time the company does not have any plans to amend or terminate the plan," said J. Randal Hall, corporate vice president and legal counsel at Bankers First. He added that public companies in other industries have such plans, but he is not aware of other financial institutions using one.
