Standard Pacific Homes, the Irvine, Calif.-based builder, released information on Tuesday about its financial agreement with Stephen Scarborough, a long-time company official who retired suddenly on March 20 as its chairman, CEO, and president. The pact, as described in a filing with the U.S. Securities and Exchange Commission, is noteworthy as much for what it does not include as it is for the compensation Scarborough is receiving, especially in light of far-more generous recent packages other public builders have bestowed on departing CEOs.
In its 8-k filing, StanPac said it had agreed to pay the 59-year-old Scarborough-who has been with the company since 1981 and served as its CEO since 2000-a lump sum severance payment of $1,250,000. The company will also pay his health insurance premiums, under COBRA, through February 2011, but is offering no other coverage or premium payments beyond that.
StanPac agreed to accelerate the vesting of 42,000 shares of restricted stock and 280,000 stock options, which Scarborough can now exercise through April 1, 2010. He will receive financial planning services from the company through June 30, 2009. (As of Oct. 18 of last year, Scarborough owned more than 2.2 million of Standard Pacific common stock, or just over 3 percent of outstanding shares.) Each side has agreed not to disparage the other and not to release "certain claims" either might have against the other, which the filing did not specify.
Typically, companies ask executives who depart voluntarily to hang around in some consulting or advisory capacity for a year or two, if for no other reason than to justify the going-away compensation they negotiate. But StanPac does not appear to have made such an offer to Scarborough, at least according to its filing.
Through a spokesman, Standard Pacific said it didn't want to comment about Scarborough's severance beyond the company's SEC filing.
While Standard Pacific was never among the public home builders whose executives received wildly inflated salaries and bonuses during the boom years, its retirement package for Scarborough is modest in the extreme compared with, say, what KB Home paid its former CEO Bruce Karatz, who left that builder in 2006 under the dark cloud of an options back-dating scandal. Not only was Karatz permitted to "retire," as opposed to being "terminated," KB awarded him a compensation package that, according to various news reports, included a severance payout of around $80 million, a guaranteed annual pension of $1 million for 25 years, and $70 million in options. When John Landon resigned suddenly as co-chairman of Meritage Homes in May 2006, the company agreed to a compensation package of $13,255,254-which included salary, severance and accelerated stock options-in addition to health and insurance premiums, 401-k matches, and other allowances valued at $10,165,319. Meritage also repurchased 1,099,136 shares of stock that Landon owned, valued at more than $52 million.
When StanPac's board denied Scarborough a bonus for 2007, it inevitably raised questions about its confidence in his performance. The timing of Scarborough's retirement, though, is hard to fathom, as it was announced only days after he assured analysts that the builder would meet its debt obligations and be cash positive in 2008. His replacement, Jeffrey Peterson, who has been on StanPac's board since 2004, has no direct home building experience, having toiled mostly in financial and private equity fields during a career that includes stints with the investment firms Trust Co. of the West and Kidder Peabody. StanPac is paying Peterson a base salary of $850,000, but has not yet established his full compensation package.