Getting fat payouts for zero or even negative performance is no longer the realm of Wall Street banks.
In Minnesota, one public company paid out $1.35 million to switch CEOs three times over a short period of time, all the while showing losses, reports the Star Tribune. Angeion (NASDAQ:ANGN), a Vadnais Heights, Minnesota-based company that makes cardio-respiratory diagnostic systems under MedGraphics and New Leaf brands, made those payments as severance to two former CEOs and as compensation to a current one.
The recipients were former CEO Rodney Young who left Dec. 31, 2010 to whom Angeion paid $624,000 as severance; another $451,000 went to former CEO Philip Smith, with whom the board parted ways in late May 2011 a mere six months after he was named to the top job. And finally, current CEO Gregg Lehman has received $279,000 in compensation.
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The payouts need to be taken in the context of continued losses at the firm. Last year, Angeion lost $152,000 on revenue of $29.6 million. In 2010, it lost $849,000 on revenue of $29 million. The most recent period the company made money was five years ago in 2007 when the medical devices company had net income of $1.01 million on revenue of $38.6 million.
Being imprudent with money previously was the reason Angeion was the target of an activist investor in 2010. In September of that year, the company restructured its board to quell BlueLine Partners, which argued that as the company’s stock price plummeted 67 percent since 2007, the company doubled the board’s pay. As a result of the public spat, Angeion replaced board chairman Dr. K. James Ehlen with Mark Sheffert, chairman and CEO of Manchester Cos., who was chairman and director for Medical Graphics Corp. when Angeion acquired it in 1999.
Sheffert told the Star Tribune that he is optimistic about the company’s future and believes that people will understand that these moves were well worth it given that the company now has a stable management team. Besides, Angeion also has roughly $10 million in cash and no long-term debt, Sheffert pointed out.
That’s all well and good, but the health of a company is always determined by net income and net income alone. And at Angeion, while the red ink is not flowing as heavily, it remains to be stanched.
