Top executives at Pennrock Financial Services Corp. in Blue Ball, Pa., are fighting a shareholders proposal that all their future annual bonuses be in stock.
The shareholder is dissatisfied with the stocks performance.
George Crisp, treasurer of the $900 million-asset banking company, said its board capitulated to a similar proposal to make bonuses a mixture of stock and cash a few years ago and has vowed not to roll over this time.
The matter will be put before shareholders at the annual meeting April 24.
In a proxy statement, the board formally objected to the proposal, which would affect the president, treasurer, and two senior vice presidents of Blue Ball National Bank. The four, whose salaries ranged from $130,000 to $278,000 last year, also received cash and stock bonuses ranging from $15,000 to $33,000.
Our contention is we work as hard as we can as it is to make the institution profitable, well managed, and have high asset quality, Mr. Crisp said in an interview. Even if 100% of our compensation was based in stock, it wouldnt make any difference how hard we work for the company.
The activist shareholder, J. Michael Flanagan, said in a proxy filed this week with the Securities and Exchange Commission: We believe this proposal will propel management to be better able to make decisions in the best interests of shareholders, and be a significant factor in achieving higher returns for shareholders in the future.
He faulted senior management for not owning more stock, noting that as of April 2000 the four executives collectively owned less than one-fifth of 1% of the company.
Though Mr. Flanagan is the only shareholder named in the proposal, Mr. Crisp said that he believes the same two investors who made an issue of executive compensation a few years ago are also involved. When the companys stock started to decline then, Pennrock executives met with the concerned shareholders and agreed to change the bonus from all cash to a mix of 80% cash and 20% stock, Mr. Crisp said.
Pennrocks executive officers receive compensation that integrates pay with annual and long-term performance goals, according to the company. It says it rewards above-average performance and recognizes individual initiative and achievements. In the future, Pennrock said, it would not rule out relying more heavily on stock-based incentive compensation packages for senior executives.
Pennrocks stock has fallen 9% in the past 12 months and now trades at nine times earnings, slightly below its peers. It was trading at $15 at midday Thursday.
Banks, especially in this area, are not doing well, Mr. Crisp said. Eventually they will go back up, and these kinds of issues will not be as hot as they are now.