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document ataşat Contract draft
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Sobolewski's contract, published by Houdini
MAKE (Translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 24 iulie 2014
MAKE: "Bravo, Ludwik Sobolewski! It's taken me a while!"
Sobolewski's contract!
Everybody asked to see it.
But he would not yield it, like a poet would say.
"BURSA" asked for it and he told us he wouldn't give it to us. In his response, he used as a justification for his refusal the undesirable fact that the there are companies listed on the Romanian Stock Exchange that do not disclose the contracts of their managers and, using an inverted moral principle as an excuse, he would only disclose his contract when all those other companies did so. The Bucharest Stock Exchange does not set an example, instead it takes as an example a behavior against which it invokes as the principles of corporate governance.
The shareholders also asked for it. In the General Shareholder Meeting of April, there were shareholders who called upon the open letter which "BURSA" addressed Sobolewski, by which we were asking him to confirm the strange clauses in his contract by which he was generously rewarded before he even lifted a finger. The shareholders have asked him to confirm whether the shocking contractual clause by which the performance of his management in 2014 would be benchmarked against the company's performance 2012, rather than 2013, was real. It was one of the strangest General Shareholders Meetings, where the employee defied his employers, who went home with the tail between their legs (and since it was late in the night, howling at the moon).
After so much ruckus, out of pure curiosity, the Financial Oversight Authority asked to see his contract. Well, he did agree to provide it to the ASF, but not right away. It took a lot of insistent requests, and the ASF never publicly stated that it got it.
But, it did. And it put it in a safe and never took it out.
Therefore, posting on www.bursa.ro a draft of the contract between Ludwik Sobolewski and the Bucharest Stock Exchange remains a "Houdini gesture" and of course, any trick will remain unexplained.
On the other hand, we are hoping that this gesture will be taken as an example by all the other companies listed on the Bucharest Stock Exchange, so that Ludwik Sobolewski will no longer have any reasons not to post his contract on the website of the BSE.
Himself.
Instead of us posting it.
The shareholders of the BSE would probably not agree to the clauses that the Board of Directors of the BSE went along with in the contract signed with the CEO of the BSE Ludwik Sobolewski, if they knew what they were.
Even though he has received insistent questions on the subject from the press as well as from the shareholders. Ludwik Sobolewski has refused to disclose his salary, and said that he would publish his salary when such a rule will be enacted that requires the managers of every issuer to do so.
Ludwik Sobolewski signed with the BSE a 4-year contract for a gross monthly salary of 16,667 Euros, supplemented by a performance bonus of 80% to 150% of the annual gross wage (between 160,000 Euros and 300,000 Euros) subject to certain conditions, and an additional bonus equal to the earnings of the previous year (salary plus performance bonus, in other words between 360,000 Euros and 500,000 Euros), according to the draft contract which came into our possession.
In the market, there was talk that Sobolewski has collected a performance bonus of 150,000 Euros for 2013, just four months after he was hired, which raised questions over the criteria set in his contract.
According to the draft contract, the CEO of the BSE was entitled, for the four months of 2013, to half of the performance bonus calculated for 2013, if he completed the restructuring of the personnel (a 67% weight in assessing the performance) and he succeeded in getting the company to post a profit of 4.6 million lei (a 33% weight in assessing the performance) in 2013.
That was it.
Had he met those criteria 100%, then the bonus would have only amounted to 100,000 Euros. Apparently Sobolewski exceeded them.
Did the Board of the Exchange also assess to what degree the CEO played a part in the meeting of those objectives?
For example, the profit of the BSE after the first six months of 2013 was 4,236,880 lei, and after nine months it was already of 5,459,769 lei, in other words it that was one goal crossed off the list, before Sobolewski even set foot in his office.
Also, the restructuring of the staff wasn't that hard to do, quantitatively. Over ten employees left their positions with the BSE at the Bucharest Stock Exchange, last autumn, who were paid severance packages, according to the negotiations carried out.
Thus, the BSE also bore restructuring costs, aside from the bonus granted to Sobolewski for said restructuring.
Moreover, it isn't clear whether the management of the BSE also evaluated the restructuring process qualitatively. Furthermore, aside from the layoffs, Sobolewski also made new hires, two Poles and former journalists.
• The inflation-adjustment of the salary
According to the draft contract, the monthly salary of Ludwik Sobolewski will be inflation adjusted. Furthermore, it can increase 10% a year after the first year, if it meets the performance criteria to an extent of 80% and if 5 IPOs take place in the first 12 months after its appointment, and the number of IPOs increases 20% every year, and liquidity increases 10%.
The liquidity is calculated as the ratio between the trade turnover and the total free-float (the sum of the individual holdings smaller or equal to 5%).
All the ratios for 2014 are measured against those of 2012, and starting in 2015, those comparisons would be made on a year to year basis.
The bonuses will be paid 50% in cash and 50% in shares. However, this clause has created a major problem for the Exchange, because in order to offer Sobolewski stock, it would have had to perform a stock buyback, for which it would have needed the agreement of the shareholders. A solution was quickly found, by offering Sobolewski money which he would then use to buy stock, which pushed him into a different trap, because the internal regulations of the BSE stipulate that the staff of the BSE does not have the right to buy shares in the BSE. The representatives of the BSE have insisted ad nauseam that the CEO is not part of the staff of the BSE, even though the ASF disagreed, through the voice of its vice-president Mircea Ursache.
• The performance criteria for 2014, compared to the numbers of 2012
In order to get his performance bonus for 2014, Ludwik Sobolewski must succeed in increasing the value of trades involving stock, mutual fund shares, rights and structured products by 50% compared to 2012 (a 40.5% weight), the value of bond trades by 150% (a weight of 4.5%), to increase the operating profit by 60% (a weight of 35%), and the median price of the shares of the BSE to be 22 lei (20% of the final evaluation), according to the draft of the contract. These quotas will decrease in the following years.
• Extraordinary supplemental bonus
Sobolewski also negotiated an exceptional supplemental bonus - if he increases the equity by 25% or if he increases the NAV by 25%, then he will get double the difference between the annual compensation and the performance bonus of the previous year.
The contract of the CEO of the BSE is concluded for a 4-year term. During this time, Sobolewski will receive a professional liability insurance policy paid by the BSE, company car and driver, laptop, mobile phone, a 1000 Euros gross allowance per month for accommodations (which can go as high as 2,000 Euros a month if necessary), four Bucharest-Warsaw two-way plane tickets per-month, Romanian lessons upon request and medical insurance with a private clinic.
According to the draft contract, Ludwik Sobolewski must dedicate 100% of his work time to the Bucharest Stock Exchange. His work schedule is Monday to Friday, at least eight hours a day, except for the legal holidays of Poland and Romania and is entitled to 25 working days of leave.
• Severance package and "non compete" clause
If the Bucharest Stock Exchange unilaterally terminates the contract with the CEO, he would be entitled to receive a gross compensation amount equal to the gross income he earned in the previous fiscal year.
If that occurs in 2014, he would be paid a total gross income of equal to the gross income for the month when the contract was terminated, times twelve.
Ludwik Sobolewski also has a "non-compete" clause in his contract. Thus, for two years after the termination of the contract, he is not allowed to buy stakes in other similar companies, and he will not provide, directly or indirectly, similar services to other companies.
The clause is valid in Central and Eastern Europe and in Romania.
Based on this clause, in the period between the termination of the contract and the date of the expiration of the non-compete clause, the CEO will receive 50% of the average monthly compensation, in the six months prior to the termination, without bonuses.
The company can waive the non-complete clause.
If this clause is infringed upon, the beneficiary must return the money.
ADINA ARDELEANU
Euro
Dolar SUA
Franc elveţian
Liră sterlină
Gram de aur
