Ousted Wachovia CEO has a big interest in a turnaround

Ken Thompson has millions of reasons to hope the next CEO of Wachovia Corp. can revitalize the bank and its beaten-down stock.

Although Wachovia’s board forced him into early retirement today, the 57-year-old ex-CEO leaves with 5.97 million vested stock options, according to a company filing with the Securities and Exchange Commission.

Unfortunately for Thompson, all of the options are under water: The per-share exercise prices are between $27.56 and $58.36. Shares of Wachovia, the fourth-largest U.S. bank, closed today at $23.40.

But most of the options expire after 2010. Thompson got 1.49 million options in February alone, and they don’t expire until 2018. There is nothing in the filing indicating that earlier expirations will be imposed. So Thompson may yet come out ahead -- depending on how quickly the bank’s fortunes revive, or if a suitor emerges to buy the company at a decent premium.

Thompson won’t be short of cash in the meantime: Wachovia is paying him a retirement benefit of $1.45 million and will cover the costs of an office and an assistant for the next three years. He also will be immediately vested in restricted stock worth $7.1 million.

And he’ll be reimbursed up to $50,000 for legal fees and related expenses incurred "in connection with the preparation and negotiation" of his termination agreement.

Which reminds me to ask: Do CEOs ever pay for anything out of their own pocket?

IndyMac CEO surrenders (underwater) options

For battered IndyMac Bancorp shareholders, it will have to be the thought that counts for the moment.

Michael Perry, chief executive of the Pasadena-based mortgage lender, has decided to give back to the company 1 million of his vested stock options, according to a filing with the Securities and Exchange Commission. And he isn't getting new options to replace them.

A nice gesture, perhaps. But Perry, 45, wasn’t likely to make money on the options soon, anyway: They had an exercise price of $24.41 a share -- more than six times IndyMac’s closing stock price of $3.95 today.

IndyMac lost $712 million in the second half of last year as loan delinquencies rocketed. The company’s stock plunged 87% last year and the shares are down 34% this year, suggesting that Wall Street isn’t feeling much better about the lender’s future.

Perry opted to cancel 1 million of his vested options, according to the filing, because he wanted to allow the company's directors to use those options to reward other employees. "While I am confident that in the long run the options would have had significant value to me personally . . . I saw that there was a much greater value to IndyMac and its shareholders in being able to spread these options more broadly among many people at IndyMac," Perry said in the filing.

You have to wonder if most mortgage-bank employees these days would rather just have cash.

Perry’s cash salary is $1 million a year. And he still has 1.5-million vested options and 210,278 that aren’t yet vested.

Photo: Michael Perry

A good call, a rough start and a numbers junkie's dream site

A few items of note from around the markets:

-- Kudos to Oppenheimer & Co. analyst Meredith Whitney, who was clear as glass in her warning on March 28 that Wachovia Corp. would slash its dividend this month amid worsening loan losses. Investors who weren’t paying attention -- or who still believed the dividend was safe -- shelled out as much as $29.97 a share for Wachovia the first week of April. The closing price Monday, after Wachovia hacked its payout 41%: $25.55, down $2.26.

-- Wachovia’s dividend cut probably produced more pain for shareholders of the Dodge & Cox Stock mutual fund in San Francisco, which counted Wachovia as its fourth-largest holding as of Dec. 31, at 3.3% of assets. Data for March 31 aren’t available yet, but Dodge & Cox tends to be a long-term investor.

The $55-billion fund, a star performer for much of this decade, hit a wall in 2007. It eked out a mere 0.1% gain for the year as large holdings including Comcast Corp., Time Warner Inc., Pfizer Inc. -- and Wachovia -- slumped. The value-oriented fund is off to another poor start this year, down 11.9% (including a 0.8% drop on Monday), compared with a 9% drop for the Standard & Poor’s 500 index.

-- Baywatch it isn’t: With annual-meeting season approaching the AFL-CIO has launched the 2008 version of its "executive paywatch" website, which as you might guess is not aimed at congratulating CEOs on their well-earned compensation last year. Anyone who enjoys looking at numbers with lots of digits to the left of the decimal point will find a gold mine here.