Queuing Up for Cash

It looks like several of the folks involved in the proposed buyout of ACS are already putting measures in place to ensure they get some green out of the process.

In response to shareholder questions about the value of the Cerberus bid, ACS announced last Friday that it was opening up the buyout process to competing bids. But don’t cry for Cerberus just yet, they get a consolation prize of $7.5 million and could see another $15 if the deal blows up entirely.

And don’t fret for Chairman Darwin Deason, either; if his personal share in a competing offer is higher than the one made by Cerberus he has to hand over 40% to them, but gets to keep the other 60% for himself.

And at the ACS annual meeting last Thursday, other ACS executives protected their own pay levels when the company’s management defeated a measure requiring non-binding shareholder approval of executive compensation. Vote margins have not been released. The defeat came after proxy advisors Glass Lewis & Co. and Institutional Shareholder Services (ISS) had recommended that shareholders pass the measure, the AP reported:

Both proxy advisory firms said it would be in shareholders' best interest to vote for an investor proposal that would require non-binding shareholder approval of executive compensation.

In an analysis, Glass Lewis found Affiliated Computer Services paid more compensation to its top officers than the median compensation for 43 similarly-sized companies.

Indeed, ACS CEO Lynn Blodgett recently earned a spot on The Corporate Library’s “pay for failure” list, which ranks CEOs according to a pay to performance ratio.

And, ACS is among the U.S.-based companies the American Federation of State County and Municipal Employees (AFSCME) chose to send its “say on pay” shareholder proposal in January. It seems that many on Capitol Hill agree. In April, the House passed a “say on pay” bill that would give shareholders a voice on executive compensation issues. The bill has strong advocates in the Senate.

Executive compensation issues are being discussed in the context of rising inequality, a trend that more Americans are feeling, more acutely, everyday. According to ISS counsel Patrick McGurn, passage of the “say on pay” bill by the House indicates that the issue of income inequality will be gaining traction among the American public, and will be a major campaign issue during the approaching national election cycle. When it comes to curbing out-of-control CEO pay, the public is looking to activist shareholders, who have been flexing their muscle to great effect of late.

So here is the multi-million dollar question in our minds: Given how the end of the exclusivity deal played out, can we be blamed for assuming that if ACS is taken behind the closed doors of Private Equity that ACS and PE execs will make sure they benefit richly while ACS employees are left wondering what will happen to them?