Cliffs Natural Resources Top Brass Cash In as Activists Take Over
NEW YORK ( TheStreet) -- Casablanca Capital unseated the board of Cliffs Natural Resources
It is perhaps ironic that shareholders, who suffered from the over 80% decline in Cliffs' stock over the past six years, allowed for a last payout to the company's outgoing directors and executives.
Shareholders backed a six-director slate run by Casablanca at Cliffs' July 29 annual shareholder meeting, meaning the fund's nominees would take control of the struggling mining company's board. But results from the vote also show that a majority of Cliffs shareholders backed a large pay package for the board and executive team they had voted to replace .
About 56% of shareholders voted for Cliffs' 2014 director, executive and employee compensation plan, allowing for a near-doubling in Cliffs' total stock awards to 11 million shares. Cliffs' compensation plan for directors included the authorization of 300,000 shares for non-employee directors and retention RSU's for top executives.
As results of the shareholder vote filtered in on July 29, the last move of Cliffs' outgoing board was to authorize stock grants and pay packages, which also came with an amendment to change-in-control features that allowed for an accelerated vesting in the event that a director or employee was fired.
Perhaps, the stock awards underscore just how tough the contest was between Casablanca and Cliffs. Casablanca, with a 5.2% stake in Cliffs of about $200 million, was able to unseat the board of what once was an S&P 500 listed U.S. mining leader.
At one point, Casablanca and Cliffs even appeared near a settlement that would leave the company in control of its board. Then after Cliffs' sent one Casablanca board nominee on a five-state tour to interview with existing directors, the company severed lines of communication.
Cliffs then threatened a default of the company if Casablanca's nominees won control of control of its board. In the days before July's shareholder vote, Cliffs cut its board nominees in order to win the backing of proxy advisory firms and maintain majority control of the board.
Ultimately, Cliffs' board only won when it came to pay.
Top executives at Cliffs are already cashing in on their new compensation package. Five top executives, including Cliffs' CFO Terrance Paradie, have exercised a total about 128,000 stock awards , which were granted on a cost-less basis, according to recent filings with the Securities and Exchange Commission . At current market prices those awards are worth in excess of $2 million.