Southern Union shareholder objects to executive compensation agreements, wants company to sell

By Lisa Kerner

Charlotte, N.C., Sept. 3 - Southern Union Co.'s largest shareholder, Sandell Asset Management Corp., said it is opposed to the "generous new compensation agreements" the company entered into with its top five executives and 20 other officers.

According to Sandell, the agreements provide for generous severance payments whether a change of control occurs and "even more generous payments" in the event of a change of control at Southern Union.

Sandell, a 9.9% shareholder, said it objects to the agreements because:

• The compensation is not tied to performance;

• The contracts are a direct transfer of value from shareholders to already highly paid executives;

• The bonus amounts are inflated by the outsized "special transaction bonuses" received by chairman and chief executive officer George Lindemann, president Eric Herschmann and senior vice president Monica Gaudiosi for completing the Sid Richardson acquisition; and

• The total value of compensation payable to the executives could exceed $100 million with over $60 million payable to Lindemann and Herschmann in some circumstances.

According to a Sandell news release, the "outsized, non-performance based compensation" shows that the Houston gas company's board "does not possess the necessary level of independence from senior management" to prevent a misappropriation of shareholder value.

"Southern Union shareholders should be outraged at this clear entrenchment device designed to transfer value to Southern Union's already well-compensated management, especially during a time period where the company's shares are underperforming its peers and management has done nothing to improve value for stakeholders other than themselves," Sandell CEO Tom Sandell said in a statement released on Wednesday.

Sandell, an investment management firm, reiterated its belief that Southern Union's management should sell the company.

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