Tuesday, November 25, 2008

A. Schulman Confounds the Imagination

Kudos to Michelle Leder at footnoted.org for some excellent spadework involving yesterday’s proxy filing for plastics company A. Schulman (SHLM). In “Gone Fishing – Seriously…” Leder flagged the section I have highlighted below in bold italics, but I thought it might be even more interesting to put the outlandish excerpt in the context of the broader scope of original document. The quotation is lifted from page 26 from a section with the title “Perquisites and Personal Benefits.”

“In April of 2008, the Compensation Committee eliminated most perquisites and personal benefits that previously had been extended to our North American Named Executive Officers, such as providing automobiles and related costs, and increased their base salaries as compensation for foregone benefits ($32,000 for Mr. Gingo and $8,000 for Mr. DeSantis). No changes were made to the perquisites provided to our European Named Executive Officers, as such perquisites are more in line with European compensation practices. We continue to maintain a founders’ membership at Firestone Country Club, which membership entitles us to designate five persons as members, one of whom is Mr. Gingo. The Compensation Committee believes that this membership is a cost-effective method of providing business related entertainment to our customers and business partners. The Compensation Committee also determined to continue reimbursing a Named Executive Officer for temporary housing expenses because the continued uncertainty relating to activist shareholders’ demands makes it difficult to require the Named Executive Officer to permanently relocate to Northeastern Ohio.

During fiscal 2008, the Compensation Committee determined that maintaining a lease on a private airplane was no longer a cost-effective method for providing business-related transportation to our Named Executive Officers and Directors. The airplane was used only for business-related travel, and personal use was not permitted. With the termination of the lease on the airplane, it also became increasingly difficult and cost prohibitive to access our Canadian fish camp. Consequently, the fish camp, which was only used for business entertainment purposes, was offered for sale during 2008. The only offer to purchase the fish camp came from Terry L. Haines, our former Chief Executive Officer and President. Ultimately we negotiated with Mr. Haines to sell the fish camp for a purchase price of $55,000 and the transaction closed during fiscal year 2009.

For fiscal 2009, the only other personal benefit that will be provided to all executive officers is a mandatory physical every two years to help ensure the health and welfare of our key personnel.”

For those who are strict adherents to the cockroach theory of malfeasance, A. Schulman’s stock made a new 52 week low on Friday and closed today 15.8% above that low. Speculators are betting heavily against the company, with the put to call ratio recently spiking dramatically to a two year high.

A. Schulman’s official motto is “Compounding the Imagination.” Perhaps they meant confounding

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