When keeping tabs on your company's doings, it's not enough to read the big, splashy press promos. Sometimes, you gotta wait a few days for the real news to come out. And what better time to release the dirty laundry (or at least the inconvenient truths) than a four-day holiday weekend when few people will be reading SEC filings?
Apparently that's what Auxilium Pharmaceuticals (NASDAQ:AUXL) was thinking. Last Monday the maker of urological and health disorder products made much of the fact that it was engaging in an orderly transition in its top ranks. Its CEO, Gerri Henwood, was resigning on July 17 to pursue other interests, and an executive vice president of sales and marketing at MedImmune (NASDAQ:MEDI), Armando Anido, was stepping in to fill her shoes. That's how we want executive transitions to occur. Neat. Orderly. Without confusion.
However, what the flowery press release neglected to mention was what everyone was getting paid. Auxilium left that for the holiday-weekend readers. Those few of us who actually bothered to slog through the report found that the incoming executive would be paid a base salary of $450,000 -- plus a guaranteed bonus of $146,000 -- for a total that's just a bit more than the $518,000 made by the outgoing Henwood. However, Anido's bonus would thereafter be pegged at 65% of his base salary, and the company would pay anywhere from 0% to 200% of it if the company achieved some unstated goals. Thus, if Anido's salary remained flat (not likely) in 2007, his bonus would be $292,500. If the company achieved these ethereal goals, it could be worth as much as $585,000, giving him a total package worth more than $1 million.
Not bad for a company that hasn't ever posted a profit, has a trailing loss of more than $36 million, and just projected that its annual loss will be as much as $43 million for 2006, some 13% higher than previously forecast.
Could be why Henwood decided to leave. In fact, her recent history is one of bolting for the door soon after she starts a company. In 1985 she started contract research organization IBAH which she eventually sold to Omnicare (NYSE:OCR) for $169 million. She then started Auxilium and is now off to pursue other interests, which may very well include starting another company.
While her exit strategy from Auxilium might not be as rich as the one she received from Omnicare, don't worry too much about her plight. Henwood will receive severance pay of $270,000, along with a pro-rated bonus of $105,000. She'll get her term life insurance policy and long-term disability policy paid for by the company for a year, as well as twelve months of paid medical, dental, and prescription drug coverage, not to mention her unused vacation time. She'll also get immediate vesting of her stock options and restricted stock awards.
Moreover, Henwood will become a "consultant" for Auxilium for eight months, at a cost of $162,000 paid in $20,000 monthly installments. Consultancies are great vehicles for giving departing executives even more money than they're already getting, but doing it in a way that's not so blatant. Last year, payday lending company First Cash (NASDAQ:FSFS) gave its outgoing CEO a 10-year consulting contract valued at $500,000 a year for unspecified duties, and Quiksilver (NYSE:ZQK) gave the chairman of a recently acquired company a five-year, $4.6 million consulting job. Hey, it's nice work if you can get it.
Auxilium is equally vague on how much time Henwood will have to put in or even what she'll have to do. It says her duties will be "substantial but less than full-time." And while either party can cancel the consulting agreement on 30-days notice -- presumably if Henwood jumpstarts another startup -- she's still entitled to the full amount of the contract, regardless of who cancels it.
If you've invested money in a company and care enough to read the company's press releases to try on stay on top of things, just make sure also watch for the other "news" the company would rather you didn't see. And if a long weekend just happens to be coming up, you can be sure there will be some juicy tidbits tucked away.
Find more juicy tidbits by consulting these related Foolish articles:
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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here . The Motley Fool has a disclosure policy .
