Lockheed's board of directors has rejected a proposal calling for the elimination of "golden parachute" severance pay for Lockheed executives, filings with the Securities and Exchange Commission showed Wednesday.
The rejection was in response to a proposal from a group waging a proxy fight for control of Lockheed Corp. The group, led by Texas financier Harold C. Simmons, last week asked Lockheed Chairman Daniel M. Tellep to allow Lockheed shareholders to vote on the proposal at the company's March 29 annual meeting.
Lockheed's severance pay contracts call for special payments to five top executives in the event of a corporate takeover. Under the plan's complex formula, Tellep would have received nearly $5.8 million if there had been a takeover January 1 that resulted in his replacement as chairman.
The proposal to eliminate the payments was advanced by J. Landis Martin, one of 15 members of a rival slate hoping to replace Lockheed's present directors. Martin is president of NL Industries, a Houston-based chemical firm controlled by Simmons. NL, Simmons' investment vehicle, holds an 18.9% stake in Lockheed and is the aerospace giant's largest shareholder.
In a March 1 letter to Lockheed's chairman, Martin cited Simmons' opposition to the concept of golden parachutes and proposed a shareholder vote on the issue March 29. Simmons has called severance payment provisions a "misuse of corporate assets."
In a letter dated Tuesday responding to Martin's message, Tellep said Lockheed's board had decided for a number of reasons that it would not seek a shareholder vote on the golden parachute issue. Tellep's letter said the board approved the severance agreements because they "enhance the corporation's ability to attract and retain the most qualified executive employees."
In addition, the Simmons group's golden parachute proposal was submitted "well past the deadline" for submission of proxy issues, according to Tellep's letter. The letter also said Lockheed's lawyers had advised the board that it may not be legally proper for shareholders to determine the fate of a proposal that would eliminate severance agreements. Referring to the size of severance payments authorized, Tellep's letter also characterized the contracts as relatively "conservative."
In a letter dated Wednesday responding to Tellep's message, Martin suggested that the severance provisions were among the "richest" in California. Martin's letter, which was faxed to Tellep, also said severance provisions were legally proper subjects for shareholders to address. The Tellep and Martin letters were both filed with the SEC.
Martin said NL Industries will propose the elimination of golden parachutes again if he and other members of the rival slate are elected to the board March 29.
Meanwhile, shareholders this week are receiving letters from Lockheed raising questions about Simmons' ability to run Lockheed and noting that the SEC is examining questions relating to Simmons' purchase of Lockheed stock.