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Wednesday, November 13, 1996
RF&P approves monetary awards, but unrest brews
BY JEFF E. SCHAPIRO
Times-Dispatch Staff Writer
RF&P Corp. approved golden parachutes yesterday for top executives, a move that could land the soon-to-be-sold company in trouble with its owner: the Virginia Retirement System.
RF&P directors backed cash awards, said to total at least $500,000, for the president and other senior officials who could be out of work when VRS completes the sale of RF&P to Lazard Freres & Co. next month.
The flap over so-called value-realization awards threatens to tarnish the $570 million deal under which VRS relinquishes a holding that has generated an excess of legal and political problems.
Charles B. Walker, RF&P chairman and a VRS trustee, said the RF&P executives deserved the payments because they ''have gone above and beyond'' in keeping the real estate firm on course during VRS' controversial ownership.He added, ''The only thing that looks bad is the slant that people put on it.''
VRS officials argued the awards were an embarrassment, coming atop salaries and bonuses that push the compensation of some executives toward $300,000.
''The senior management of RF&P has a very attractive compensation plan,'' said VRS trustee Edwin T. Burton III. ''Any additional payments would be unjustified and unwarranted.''
The dispute puts at odds the three men credited with guiding the sale to Lazard -- Walker, Burton and VRS investment chief Erwin H. Will Jr. -- and could spill over to next week's meeting of the VRS board.
''You can't win 'em all,'' said Will, who argued against the payments during nearly five hours of closed meetings with the RF&P board and its compensation committee.
It is not clear what VRS, as RF&P's only stockholder, can do to stop the awards. One option is to fire the board and install new directors with instructions to rescind the payments. That is unlikely since RF&P, a former railroad, is to be turned over to Lazard in only 2 1/2 weeks.
RF&P directors said little publicly about the awards, to be paid after VRS closes the deal with Lazard. The amount of money, how the payments are calculated and the eligible executives will be disclosed after the sale. But sources said the awards could exceed $500,000 and would be distributed to about a half-dozen top employees, including President and Chief Executive Officer Denton U. Kent. Walker said the awards were based on a plan put in place 18 months ago in anticipation of RF&P's sale. He said directors favored incentives for executives to help boost RF&P's value while it was on the block. This, Walker said, included the conversion of RF&P to a real estate investment trust, a move that slashed the company's potential tax bill by $300 million. ''There is no reason to give them anything but high praise,'' he said of the top executives. ''The company we see today is a lot different than the one we inherited.''
VRS officials don't dispute this, but say the latest controversy sends a troubling signal.
''I don't worry as much about the public relations problems as doing the right thing,'' Will said.
A separate performance-based bonus program, also approved yesterday by RF&P directors, includes a pool of $400,000 to $500,000. About 30 RF&P employees are eligible.