Who's Filing Now?

Once again, as Wall Street waits for happy hour, we Fools wade into 8-K filings that it seems executives would prefer you didn't read.

That includes filings like this one, from memory-chip maker Rambus (Nasdaq: RMBS  ) , and this one from Internet security specialist VeriSign (Nasdaq: VRSN  ) . Both companies were notified by the Nasdaq Stock Market that they are out of compliance with financial filing guidelines. As a result, both risk delisting.

Sharper Image's dull deal
Worse still is the sweet deal Sharper Image (Nasdaq: SHRP  ) gave to interim CEO Jerry Levin. After reporting a 24% decline in same-store sales for February, the ailing retailer effectively doubled his salary. Here's the specific language:

"For the period February 1, 2007 through the earlier of (x) the expiration of 90 days after the commencement of employment by the Company of a permanent Chief Executive Officer and (y) the First Anniversary (such period through the earlier of such dates, the 'Supplemental Retainer Period'), a supplemental cash retainer which shall be payable to JWL Partners in advance on the first day of each month of $100,000 per month (other than any partial month) and for any partial month, $100,000 pro-rata based on the actual days elapsed in such month." [Emphasis mine.]

For the record, JWL Partners is Levin's company, which specializes in corporate turnarounds. His role at Sharper Image is governed by a services deal agreed to on Sept. 24, 2006. Check out the terms:

"The term of the agreement is one year, subject to earlier termination by either party. Compensation will be $750,000 annually in the aggregate for the services of Mr. Levin and JWL Partners, in addition to reimbursement of travel and other business expenses." [Emphasis mine.]

Let's do the math. Unless Sharper Image hires another CEO before the end of June, Levin will be due $700,000, plus $83,333 for 25 days of service in September. And that's on top of stock options and the $750,000 in cash that he's due per his first contract.

But my problem isn't so much with Levin's level of compensation as with his terms. Remember, every dollar of Levin's raise is paid in advance. April's payment, for example, is due in 20 days.

Those are extremely generous and unsettling terms. Seriously, why offer advance payments to an interim CEO who has yet to make material improvements in the business? Perhaps it's because no one else wants the job? Perhaps.

My personal theory is that Levin is demanding a premium now because Sharper Image is duller than anyone could have imagined even a few months ago. Either way, this deal is awful news for existing shareholders.

And this week's sign of the apocalypse
But my favorite filing this week comes courtesy of Inside Value pick Colgate-Palmolive (NYSE: CL  ) , which announced that 77-year-old director Howard Wentz wouldn't stand for re-election at the May annual meeting. He'd like to retire, the 8-K says.

Furthermore, Colgate has amended its corporate bylaws so that all nominees for directorships must receive more than 50% of the votes cast to keep their seats. Abstentions, the 8-K says, won't be counted as votes cast, as is often the case at other firms.

So, what's the bad news? Turns out there isn't any. Check out the fine print:

"The amended By-Laws require director nominees who do not receive a majority of the votes cast to promptly tender their resignation to the Board of Directors in accordance with an agreement that each nominee for election as a director is required to sign to be eligible for election or re-election as a director. The governance committee of the Board (the "Committee") will make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation or to take other action. The Board of Directors is required to act on the tendered resignation, taking into account the Committee's recommendation, and to publicly disclose its decision and rationale within 90 days from the date of certification of the election results." [Emphasis mine.]

See what's going on here? While Colgate doesn't have to fire every director who fails to garner 50% of the vote, its corporate bylaws now state that, when it doesn't, the board must publicly present an explanation to shareholders within 90 days of its decision. Talk about accountability. Are you listening, Home Depot (NYSE: HD  ) ? Blockbuster (NYSE: BBI  ) ?

I can't for the life of me figure out why such a Foolish change made it into Friday's late filings, where 99% or more of the news is awful. Here, shareholders have every reason to applaud. Happy retirement, Mr. Wentz. And well done, Colgate.

That's all for this week. Think you've found a late filing we Fools should see? Let me know.

Colgate-Palmolive and Home Depot are both Inside Value recommendations.

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Fool contributor Tim Beyers, who is ranked 1,593 out of more than 24,000 in our Motley Fool CAPS investor intelligence database, usually favors two scoops of ice cream over the inside scoop. Tim didn't own stock in any of the companies mentioned in this story at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on SEC filings, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy may be filed under "F" for fair, or Foolish.


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