December 24

Freeport (FCX) CEO Adkerson Gets the Gold & Shareholders Get the Shaft –

AdkersonIt’s only been a year since the board and management of Freeport McMoRan (FCX) launched a self-serving deal that lined the pockets of insiders while losing $Billions in market cap for shareholders. Here they are once again pushing the envelope on greed and incompetence. Yesterday the company awarded CEO Richard Adkerson 1 million restricted stock units convertible into 1 million shares on retirement. He is currently 66 years old. At today’s prices were talking about $36 Million. 

In return for the one million shares, he gives up his current employment contract where he would have gotten $49 Million if fired or $60.8 Million if there was a change of control.

This is a brilliant move on his part. Mr. Adkerson gets to lock in a cool $36 Million up front. It’s unlikely he would have been fired and maybe he doesn’t think the company will be taken over.

I’ve saved the best for last. According to the Wall Street Journal, Gerald J. Ford an independent director at Freeport said the new arrangement was a way to keep Mr. Adkerson in place as CEO. “We want to maintain continuity,” Mr. Ford said.

FCX 2013Are you kidding me? Not counting 2013, Mr. Adkerson has received $84 Million in compensation since 2010.** With the stock down close to 30% in a raging bull market, it hardly looks like a good deal for shareholders.

A year ago Mr. Adkerson was involved in what many analysts considered a questionable deal when Freeport’s board authorized the takeover of McMoRan Exploration. He was Co-Chairman with another FCX insider James Moffett. At the time, Mr. Adkerson owned over 346,000 shares of McMoRan Exploration which had just taken a 40% hit in its stock price following negative news. McMoRan Exploration (MMR) went up over 80% following the announcement. The following day Goldman Sachs, Deutsche Bank, BMO Capital Markets and RBC Capital Markets all downgraded FCX shares on the merits of this deal, some even pointing to shareholder trust as reasons for the downgrade. (Click here for details in my article for Seeking Alpha last year)

Gekko GreedI guess Gordon Gekko was right. “If you’re not on the inside, you’re on the outside.” It’s pretty clear that Mr. Adkerson is very much on the inside and still pulling the strings on this puppet show.

Corporate board structure in this country needs to be addressed. Rules and maybe laws need to be changed to prevent the continued rape of the American shareholder.

It looks like Greed wins this round with Mr. Adkerson getting the gold and shareholders getting the shaft.

– David Nelson, CFA

** Source Wall Street Journal