WASHINGTON — According to Reuters, the AFL-CIO labor group on Tuesday criticized U.S. Treasury Secretary-nominee John Snow’s railroad company for an “unusual” clause in his severance deal that will pay him millions if he goes into public service.
The organized labor body said Snow’s deal with CSX Corp., the Richmond, Virginia-based rail giant, will trigger lucrative payments if he lands a government job.
“It’s a very unusual clause and I’m not aware of that for any other golden parachutes,” said Brandon Reese, a research analyst at the AFL-CIO’s Office of Investment.
“The whole contingent of the 2001 employment agreement was to retain Snow’s employment as chairman and CEO (chief executive officer) through 2004. At a minimum, it appears to be a poorly structured plan if he can get his severance for going into public office.”
Snow is poised to get at least $3.3 million in salary, bonus and retention compensation, according to severance details in a March 2002 proxy filing with the Securities and Exchange Commission.
He also stands to make millions more from restricted stock and a life insurance policy, the AFL-CIO said.
The question now remains, Reese said, is what benefit Snow’s Treasury position is going to provide CSX shareholders given that it’s going to cost them millions of dollars.
A spokesman for CSX said the company would issue a statement shortly on matters raised by the AFL-CIO.
The American Federation of Labor and Congress of Industrial Organizations has made its compensation concerns to CSX known well before the 63-year-old Snow was tapped by President Bush to replace Treasury Secretary Paul O’Neill.
It wrote a letter to the company in April 2001 about the cancellation of an executive loan stock purchase program under which Snow had borrowed from the company to buy $32 million in shares using a down payment of shares from a previous plan.
“Our concern at the time was that the cancellation of those loans had the appearance of rewarding underperformance,” said Reese. “They structured this plan to benefit him if the share price had gone up but because the share price declined, they eliminated the plan.”
Since Snow became chairman of CSX in January 1991, his company’s shares have lagged significantly behind his top competitors in the U.S. rail business.
In nearly a dozen years with Snow at the helm, CSX shares have posted a rise of just about 7 percent compared with a 60 percent increase for the Standard & Poor’s railroads index .
Last year, Snow made $1.2 million in base salary, a $1 million bonus as well as $393,277 in life insurance premiums and other compensation, the SEC filing showed.
He was also given options for 800,000 shares that the company valued at $8 million when they were granted in July 2001.
The options, which expire in July 2011, can be exercised for $38.78 a share, putting them underwater as the company’s stock is currently trading for about $28 on the New York Stock Exchange.