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Cabela's didn't meet financial goals in 2015, but executives still collected big bonuses
At Cabela’s, failing to meet profit goals didn’t stop top executives from collecting big cash bonuses for the work they did leading to the buyout by rival Bass Pro Shops that could cost thousands of Nebraska jobs.
Sidney-based Cabela’s on Thursday filed documents with the Securities and Exchange Commission that detail the compensation paid to the top executives for 2015. Notable was the payment of cash bonuses — extra money above salary, incentive pay and other forms of compensation. Chief Executive Tommy Millner collected $392,376 in cash bonus, leading the pack.
These bonuses are a new thing at Cabela’s: The board committee supervising executive compensation didn’t award cash bonuses in either of the previous two years.
But a strange thing happened on the way to cashier’s office for 2015: The executives failed to achieve the financial goals that were laid out ahead of time to qualify for the bonuses. So the company just changed the objectives after the fact to bring the goals in line with actual performance — essentially rigging the bonus game in favor of the bosses.
They employed no subterfuge, openly describing it all in the SEC document filed Thursday.
“The minimum corporate financial objective for earnings per share was not met,” Cabela’s wrote in its proxy statement. “The Compensation Committee, however, recognizing that the company incurred certain restructuring charges and other non-budgeted items during 2015, exercised its discretion to modify the way earnings per share was calculated for incentive purposes to include, on an after tax basis, a total of 13 cents per share of modifications relating primarily to severance payments and professional fees for the company’s restructuring initiatives.”
In other words, the company failed to earn for 2015 the $2.80 a share that was agreed on ahead of time as the minimum amount that would trigger cash bonus payments for the head honchos. So, the company added 13 cents per share to its 2015 earnings — strictly for the purposes of bonus accounting — so as not to penalize the bosses for the money the company spent last year on severance payments and legal fees that were unbudgeted going into the year and that cut into the bottom line.
Presto — annual 2015 earnings per share suddenly became $2.88 — beating the minimum bonus target of $2.80 with plenty to spare.
“It’s called moving the goalposts,” said Brandon Rees, deputy director of the AFL-CIO Office of Investment. “People take a dim view of numbers being reported by companies that don’t conform to generally accepted accounting principals.”
Cabela’s late-stream adjustments to the rules of the game didn’t affect shareholders — the company’s official earnings per share for 2015 were unchanged. The adjustment was only for internal use.
“It’s a sign of the disconnect,” Rees said. “The goalposts were moved so executives could collect bonuses, while employees are being asked to make sacrifices.” Rees’ organization is an umbrella for union-sponsored pension plans that have about $560 billion of investments designed to create income and assets for member retirement benefits.
Kevin Murphy, a business professor at the University of Southern California and executive compensation expert, said such maneuvers were common among banks during the financial crisis of 2008 and 2009.
“They still wanted to pay, so they used the bonus column,” Murphy said.
He said the use of such engineering has legitimate uses in the high world of executive compensation, where the competition for talented leaders is fierce.
“Stuff happens that is out of the control of management,” Murphy said, referring to one-time events such as the unexpected expenses Cabela’s encountered.
A spokesman for Cabela’s didn’t return a request for comment on the executive compensation, which coincided with the eventful 2015 at Cabela’s.
In October 2015, Wall Street agitator Elliott Management announced a large stake in the retail chain, whose shares underperformed the overall stock market by 25 percent in preceding three years. Elliott is accustomed to getting what it wants — operational changes, selling divisions or hiving off the whole corporation to a better operator.
In December 2015, Cabela’s said it was exploring all its options — usually a bad omen for employees. This fall, it all came to a head, after Missouri-based Bass Pro came calling, offering $65.50 a share, or a 40 percent premium over the share price just before Elliott said it was on the scene.
Bass Pro, with about 100 stores, isn’t expected to need two of everything, endangering the 2,000 positions in Sidney. State officials have said they’re working with Bass Pro to preserve as many jobs as possible in Sidney; still, mergers-and-acquisition specialists have said the ax is likely to fall hard.
Other bonus payments disclosed by Cabela’s on Thursday:
» President Scott Williams, $166,990.
» Sean Baker, chief of the banking unit, which runs the credit-card division, $136,932.
» Chief Financial Officer Ralph Castner, $158,640.
» Chief Operations Officer Michael Copeland, $155,300.
» Strategic Advisor Brian Linneman, $175,339.
Of course, the bonuses are just a fraction of what the executives earned overall. Millner lead the way in total compensation, at $4.2 million, a small overall pay cut from 2014. The rest of the top squad collected $1.45 to $1.54 million apiece last year, with each getting a raise from a year earlier.
The sale to Bass Pro Shops is also likely to trigger severance payments for the top executives at Cabela’s. That would amount to sums ranging on the high side to about $8 million for Millner and amounts ranging from $2.6 million to $3.6 million for the others.
And the gravy train won’t stop there. Cabela’s said in its filing Thursday that Millner, Williams, Castner and Baker will be eligible for bonus payments for the work they are doing now. Millner stands to collect as much as $2 million for achieving goals in the run-up to Bass Pro taking over some time next year. The others’ amounts range from $712,000 to $1.3 million.
David Lewin, an emeritus business professor and executive compensation expert at the UCLA Anderson School of Management, said within certain narrow limits, boards of directors at publicly traded companies can do pretty much as they see fit when it comes to executive compensation.
“If management decides the goalposts were a yard too high, it is up to them if they want them lowered,” Lewin said. “Shareholders might not like it, and if I were an employee who didn’t get a bonus, I know I for sure wouldn’t like it.”
George Morgan, a business professor at the University of Nebraska at Omaha, echoed that sentiment.
“Basically, what they are saying is if we make the rules, we can break the rules,” he said. “Executives of publicly traded companies seem to have a sense of entitlement about big salaries. This proves that you don’t have to live in New York to think that way.”
russell.hubbard@owh.com, 402-444-3133