Stefan Borgas, who became CEO of Israel Chemicals (TASE: ICL: NYSE: ICL) in September 2012, is resigning (or being fired, depending on whom you ask) after four years in the job. A check by "Globes" shows that during his term, his salary cost totaled $13.3 million, although this includes the total cost of the options granted him and recognized as an expense in ICL's financial statements. He did not exercise these options, because they went out of the money fairly quickly, meaning that they became worthless.
In addition, only in March 2017, when the company issues its 2016 financial statements, will the cost of his 2016 become known, including his retirement compensation. Since Borgas served only four years in his position, it is likely that the amount of compensation will not be enormous - perhaps only a few million dollars more.
According to Israel Chemicals, if Borgas is voluntarily resigning, as indeed happened, he is entitled to a payment for prior notice amounting to six months' salary (i.e. $500,000, NIS 1.9 million), compared with 12 months' salary if the company fired him. In other words, Borgas "waived" $500,000. This prior notice payment is in addition to the amounts regularly set aside for pension and compensation. Borgas's severance pay will be provided according to law: his last monthly salary, multiplied by the years he worked in his position i.e. $300,000.
Excluding the costs of capital remuneration, Borgas accumulated $8.5 million in salary (NIS 32 million) during a period when the Israel Chemicals share price lost 66% of its value (due to the fertilizer industry crisis, among other causes), while the Tel Aviv 100 Index, in which the share is included, added 26% to its value.
Is this a fair wage? Not really, especially not in 2013-2014, when Borgas got a bonus for the company's performance.
According to Borgas's employment terms, his monthly salary was $83,333, paid in shekels (NIS 300,000), because he relocated to Israel when he was appointed CEO. In addition, Borgas was entitled to up to $8,250 in expenses relating to his living quarters (NIS 30,000, no small sum) for the period of his work at the company or three years, whichever is shorter (meaning that during his last year in the job, he apparently paid his rent himself), and up to $10,000 net per child for the education of his children in Israel (a quick calculation gives NIS 3,000 a month).
Borgas was also entitled to airline tickets for two vacation trips a year in Europe for him and his family, and for a portion of the cost of medical insurance for him. In short, Israel Chemicals coddled him, but he did not coddle the company's investors.
Worthless options
Borgas's capital remuneration actually gave him nothing, because the share lost two thirds of its value when he was in office. Upon taking up his position, Borgas received 1.19 million options at an exercise price of NIS 40.49 (adjusted to last March), while the Israel Chemicals share is now trading at NIS 16. Bottom line: these options are worthless.
In the summer of 2014, Borgas received 367,294 options at an exercise price of NIS 26.76, also out of the money. He also received 85,907 vested shares free of charge, but these are exercisable only in December 2016, meaning that they have not yet matured. In the spring of 2015, Borgas received a similar package of options and vested shares, but these are also far out of the money. In short, the fall in the Israel Chemicals share price had a negative impact on Borgas's pocket.
Published by Globes [online], Israel business news - www.globes-online.com - on September 11, 2016
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