Announcement

Collapse
No announcement yet.

Hovnanian's pay too high - governance firm

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Hovnanian's pay too high - governance firm

    Hovnanian's pay too high - governance firm
    Thu March, 2009
    NEW YORK, March 12 (Reuters) - Corporate governance firm Proxy Governance
    Inc has recommended that shareholders withhold votes from the directors on
    Hovnanian Enterprises Inc's compensation committee because of the chief
    executive's high compensation relative to that at peer companies.
    CEO Ara Hovnanian's average three-year compensation is 290 percent above the
    median paid to chief executives at peer companies, Proxy Governance wrote in
    its report.
    "The company's executive compensation is high due to its equity grants and
    bonus grants in fiscal 2006 and 2007," the firm wrote. In fiscal 2008,
    Hovnanian received about $4 million in total compensation, with about $1.5
    million From stock options and almost $1 million in bonus on top of a $1
    million base salary.
    But Chief Financial Officer Larry Sorsby said that although under accounting
    rules the company must report those options as income in the year that they
    vest according to the value that they had when they were granted, they are
    worthless because the company's share price has fallen so precipitously.
    "Based on our recent stock price, our stock would have to increase by about
    800 percent for even the lowest-priced option to be worth anything to Mr. Ara
    Hovnanian," Sorsby said.
    Hovnanian received a bonus because he increased the company's cash position
    to over $800 million at the end of 2008 from $12 million at the end of 2007,
    Sorsby said.
    The company is family controlled, which means the family can approve any
    proposal on the shareholder ballot with its own votes alone, Proxy Governance
    said. "Any shareholder vote on the issue is essentially a protest vote. We
    believe that shareholders should use it as such."
    On the grounds that Hovnanian's compensation fell by 31.56 percent to about
    $4 million in 2008, rival governance firm ISS Government Services did not
    recommend in its report that shareholders withhold votes for the compensation
    committee's members.
    "We will, however, continue to monitor the company's pay practices to ensure
    that there is no pay-for-performance disconnect going forward," ISS wrote.
    The homebuilders are mired in the worst housing slump since the Great
    Depression. Hovnanian's shares are down about 95 percent from their high on
    the year in March 2008. They hit their lifetime high of $73.40 in July
    2005. (Reporting by Helen Chernikoff, editing by Gerald E. McCormick)
Working...
X