A Subsea Player's Suboptimal Governance

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I've said a lot of nice things about offshore engineering ace Acergy (Nasdaq: ACGY), and those comments still ring true. The balance sheet is a beauty, the company's well-positioned to profit from ongoing development of deepwater oil projects, and the stock's cheap.

Bob Robotti of Robotti & Company, a shareholder since 1995, has been a fan of Acergy far longer than I. When he speaks out about the subsea player's shortcomings, he's not pulling some quick-flip hedge fund routine. His firm's position in Acergy exceeded those of next-largest holdings Panhandle Oil & Gas (NYSE: PHX) and Pre-Paid Legal (NYSE: PPD) by a wide margin at year's end, and I believe Mr. Robotti has very legitimate concerns that things have gotten out of hand.

In a letter to the Board of Directors, Robotti has outlined a slew of soft spots in Acergy's corporate governance, flaws that should be worrisome to any Acergy shareholder. Even if you don't know Acergy from your elbow, you can still learn from these examples, and keep a closer eye on how your own investments treat outside shareholders.

Here are a few highlights of the lengthy letter:

• Acergy appears to have issued options in excess of the number approved by shareholders.
• The company has proposed a large equity compensation package with no extended holding period for the restricted stock awards. Worse, these shares would be issued at a time when shares appear to be dramatically undervalued.
• Acergy is holding repurchased shares in treasury, rather than canceling them like PotashCorp (NYSE: POT) does. There is a 10% ceiling preventing the company from maximizing the opportunity to repurchase a slug of shares at today's low prices.
• Board members' ownership was an abysmal 0.04% of shares outstanding, as of April 30, 2008.

That last bullet sums it up pretty well. There's a lack of an ownership culture here, which too often leads to lapses on other fronts, such as the ill-conceived long-term compensation plan. Helix Energy Solutions (NYSE: HLX) has a chairman with some skin in the game, as does Oceaneering International (NYSE: OII) -- if only a few million dollars' worth. Minimal share ownership requirements, such as those implemented by NATCO Group (NYSE: NTG), are an important first step toward changing the culture at Acergy for the better.

Acergy is rated a respectable four stars by Motley Fool CAPS participants. Is the subsea specialists' outlook strong or soggy? Sound off right here.