Cbeyond Inc. shareholders on Friday voted in favor of management proposals, including the election of three directors and an advisory resolution in favor of compensation for certain executive officers.
S. Scott Luttrell, Martin Mucci and Bonnie Wurzbacher faced expiring terms but were elected to serve on the eight-person board until an annual meeting in 2015.
Directors play a crucial role in governing corporations, as reflected in their power to remove the chief executive, though their roles often are behind the scenes since executives run the day-to-day operations.
Most of the board members at Cbeyond are outside directors, including the three recently elected.
The 57-year-old Luttrell is founder of LCM Group, Inc., an investment company based in Tampa, Fla. Mucci, 52-years-old, is president and CEO of Paychex Inc., a provider of payroll, human resources and benefit outsourcing solutions to small and medium-sized businesses. The 55-year-old Wurzbacher has been with The Coca-Cola Company for 27 years.
Members of Cbeyond’s board, which met 10 times last year, all were compensated handsomely mostly due to the granting of stock awards.
“Our equity compensation for non-employee directors consists of an initial grant of $100,000 and an annual grant of $200,000 in restricted stock which vests one year from the date of grant,” Cbeyond revealed in its proxy statement.
Luttrell was awarded $42,000 in fees earned or paid in cash plus $188,943 in stock awards, according to a proxy statement. Mucci received the exact same compensation while Wurzbacher was awarded $8,904 in fees earned or paid in cash plus $100,004 in stock awards, the proxy statement showed.
By comparison, the average restricted stock units awarded to directors at 457 public companies tracked totaled $81,565.00, according to the 2011/2012 Board of Directors Compensation Report from Total Compensation Solutions, a compensation consulting firm based in Armonk, N.Y. (Restricted stock units exclude stock options, which can be difficult to calculate). These companies had average revenues of $4.2 billion; by comparison Cbeyond posted 2011 revenues of $485 million.
Such compensation is not excessive if it concerns a company worth a few billion dollars and when considering the crucial role of the directors to steer “the ship”, according to Tom Bailey, director of finance and marketing with Total Compensation Solutions.
“They are the ones responsible to the shareholders,” he said, referring to the directors. “In the end, they are the ones responsible if the companies [are] not doing what they are supposed to be doing.”
Cbeyond’s board is comprised of seven directors who are considered “independent” plus one employee director: James F. Geiger, the 53-year-old chairman, president and CEO of the company, which he founded in 1999.
During the annual shareholders meeting in Atlanta Friday, shareholders also approved, on an advisory basis, the compensation of certain Cbeyond executive officers. Like most public companies, Cbeyond’s formula for compensating executives is rather complicated and based on a variety of performance metrics.
Geiger is among several Cbeyond executives who received lower compensation last year, the proxy statement showed. He earned compensation of $1.548 million, down from $1.941 million in 2010. Cbeyond said it took into account weaknesses in its share price when deciding to reduce certain bonuses awarded last year.
The stock price has gotten hammered over the last 18 months and is now worth less than half of its price since January 2011, data from the NASDAQ shows. Shares were trading Monday afternoon at $6.29.
The communications provider has changed its strategy with a heavy focus on businesses in need of IT and cloud services.