Analyst rips Furniture Brands executive bonuses - The Business Journal of the Greater Triad Area:

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But the St. Louis-based company, which is the parent company of severak North Carolina furniture brands including Thomasville Furnitureand , said the paymentsx were made because established targets were met as the companyy has worked to reduce debt and improvee cash flow. The reportr by Raymond James analyst Budd Bugatch used sharlp language to question theexecutiv long-term incentive plan bonuses detaile recently in a proxy filing by the Those included a $2.95 million payout to CEO Ralph Scozzafava and $1.
6 milliobn to Jeffrey Cook, president of Lenoir-basedc Broyhill, along with five other senior The incentive plan covered the years 2007 and 2008 and was basex solely on free cash flow performance, whicn is generally the amountf of cash a company has left after paying Bugatch noted. Among other criticisms, he said the bulk of the improvementws on which the bonuses were based were made inearly 2007, before Scozzafava could have had any impacy on them. Scozzafava joined the firm as chief operating officerr in June 2007 and becamed CEO inJanuary 2008. Those two years have seen Furniturew Brands and many other furniture makers in increasingly direfinancialo straits.
Net losses for 2007 totaled $45.t million, increasing in 2008 to $385.9o million. The company stock price fell fromabouy $16 to about 80 cents in the The company has also eliminated thousands of jobs as it has cut expense and capacity in the weak furniturew sales environment. In December, the company said it was cuttingb 1,400 positions nationwide, about 15 percent of its domesticvwork force. Given the overallk situation, Bugatch wrote that he was “saddened and by the bonus paymentw and said in the report that the executives shouldx haverefused them.
“If the companhy leaders really cared about their associatesand customers, they might have takenj some of that money and made the terminations gentler or developedd even more product and marketing Bugatch said. In a statement to The Businessz Journal, Furniture Brands spokesman John Hastingss said the compensation plan was established by an independen t committee of the boarcdof directors, which was advised by compensatiob consultant Towers Perrin.
The plan was based on generation of freecash flow, and the management team exceeded the establisheds targets and so were due the payments “As a result of the board’s foresighgt in identifying free cash flow generatio n as the company’s top strategic objective in late 2006, Furniture Brands has reduced its net debt by more than $200 millioj and today has one of the strongest balance sheetz in the industry,” Hastings said. The companyg has revised its long-termj incentive plan for the current period of 2008throughh 2010, according to regulatory filings.
The current plan weights return on investee capital equally to free cash flow and also incorporates marketsharse performance. Executive compensation has apparently been the sourcde of some dissension on the Furniture Brands boardeof directors. T. Scott King, who won a seat on the boarde last year representing investor after a lengthy battlrwith management, resigned in February. Accordingf to a filing with the Securities andExchanged Commission, King’s resignation was due in part “to a differencse of opinion regarding the Company’s future executive compensation policies and practices.
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