HOUSTON (CN) – Shareholders sued Hercules Offshore’s board of directors for handing out giant pay raises to its CEO and other top dogs last year, though the company lost $145 million in 2010.
In a derivative complaint of shareholder oppression, named plaintiff Sean Matthews says the board violated the company’s “pay-for-performance policy.”
Hercules shareholders rejected the company’s “excessive 2010 CEO and top executive compensation” by a 59 percent vote on May 10, according to the complaint in Harris County Court.
“The Hercules Board’s decision to increase CEO and top executive pay in 2010, despite the company’s severely impaired financial results, was disloyal, irrational and unreasonable, and not the product of a valid exercise of business judgment,” Matthews says.
“The Hercules Board’s unanimous recommendation that Hercules shareholders approve the 2010 executive compensation was also materially false and misleading when made. This is because the Hercules board failed to disclose that the 2010 pay hikes for Hercules’ CEO and top executives were excessively large and irrational based on Hercules’ poor shareholder returns.”
Hercules shareholders received a negative 27 percent return in 2010, according to the complaint.
But CEO John Rynd got a 90 percent pay boost to $2.5 million in 2010; vice president James Noe got 107 percent hike to $1.2 million; and CFO Stephen Butz’s pay nearly tripled – he got a 189 percent raise to $963,000, according to the complaint. All those officers were named as defendants.
Also named as defendants are Chief Accounting Officer Troy Carson, whose pay jumped 159 percent to $829,000; vice president Terrell Carr, who got a 149 percent raise to $1 million; and human resources vice president Lisa Rodriguez, who got a mere 40 percent raise to $959,000.
Matthews says all the executives “falsely represented to Hercules’ shareholders in Hercules’ 2011 proxy statement that Hercules followed a pay-for-performance executive compensation policy in 2010 when, in fact, it did not.”
He adds: “Hercules has been damaged by the Hercules Board’s failure to publicly rescind the 2010 pay hikes to Hercules’ CEO and top officers.”
Also sued are Hercules board members Thomas Amonett, Thomas Madonna, Gardner Parker, Suzanne Baer, Steven Webster, Thomas Bates, Thomas Hamilton and Thierry Pilenko.
“Hercules compensation consultant” Frederic W. Cook & Co. is also a defendant.
Matthews seeks a declaration that the May 2010 shareholder vote rejecting the 2010 executive compensation plan “rebuts the presumption of business judgment surrounding” the board’s decision to increase the executives’ pay.
Matthews alleges breach of fiduciary duty and unjust enrichment, and accused Frederick W. Cook & Co. of aiding and abetting and breach of contract.
He is represented by Jamie McKie of the Kendall Law Group of Dallas.