YRCW Executives’ Employment Restructuring Update

 

On Friday, January 2, YRCW announced it was restructuring its employment relationships with its CEO James Welch and its CFO Jamie Pierson. The Teamsters National Freight Industry Negotiating Committee had no prior knowledge of the January 2 announcement although we were aware that both Welch and Pierson’s existing four-year contracts were expiring in 2015.

Since the Friday announcement we reviewed the various news reports, filings the company made with the Securities and Exchange Commission (SEC), and have spoken with members of the board of directors and CEO Welch to understand terms and changes in the employment relationships of Welch and Pierson. We are confident that the changes announced on January 2 do NOT contain any cash compensation for the termination of their contracts. With respect to stock, there were no additional allocations of stock that weren’t already part of their existing arrangements with the company.

Contrary to what was suggested in some news reports (that were later clarified) and misinformation being circulated, we wanted to provide a summary of the facts based on our review of the filings. Below is a factual summary of the changes in YRCW’s employment relationship with Welch and Pierson. 

 

	Terminated Contract (in place since 2011)	New
Term	4+ Years (Welch expires 7/31/15; Pierson 12/31/15)	At-Will – can be terminated without cause with severance or for cause with no severance.
Base Salary	Base plus contractual increases in each year	No increase announced. No guaranteed increases – to be reviewed annually by Board of Directors.
Stock	Stock grants each year, vesting fully one year after grant.	No increase announced. No guaranteed increases – to be reviewed annually by Board of Directors.
	Guaranteed total grant of 2% (1% for Pierson) of outstanding shares by the end of their contract.	Removed. Will require CEO and CFO to maintain a set minimum level of stock ownership to ensure that they share in the success or failure of the business.

As part of the transition to the “at-will” status YRCW terminated the old contracts but fulfilled its stock obligations under those contracts by issuing the outstanding awards but maintained a vesting schedule (ability to sell those awards) through February 2016 (although slightly accelerated when compared  to the original contract terms). 

The second component of the transition to the “at-will” status for both executives is the severance agreement. Previously the contracts were guaranteed so there was no need for a severance agreement. Now both executives can be terminated without cause with severance or for cause without severance.  If they leave without a good reason they are also ineligible for severance. Severance payments only apply for terminations without cause, voluntary separation for a defined reason, or a change in control (ownership of the company). 

We are confident that the changes announced on January 2 do NOT provide new or increased bonuses to YRCW’s top officers.  With that said, this change did offer TNFINC another opportunity to raise our concerns about outsized increases, stock awards or other bonuses– which is timely as the Board will be considering the 2015 compensation package for the CEO and CFO between now and the company’s annual meeting (usually held in late April or early May). TNFINC will continue to press both the YRCW management team and the Board of Directors to remember the sacrifices that have been made by the rank-and-file and implement a fair and sensible compensation package for YRCW’s top officers.

 

 

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