According to a July 17th article from regulatory filing research firm footnoted*, it appears there is at least a chance that former Hertz CEO Mark Frissora will face an attempt to clawback some of his compensation based on new SEC rules.
This revelation is notable both in terms of the potential impact on Frissora’s finances, and in terms of the ramifications it may have on his new job as CEO of Caesar’s Entertainment.
Hertz filing hints ex-CEO Mark Frissora may face pay clawback
footnoted* has completed a thorough examination of the rental car industry leader’s delayed, but recently filed 10-K annual report for 2014, which included restated results for 2012 and 2013 and the firm’s first quarter 10-Q filing for 2015, and noted an important disclosure buried deep in the more than 400 page document.
The article highlighted a section of Hertz’s annual report that discussed the problematic actions of a “former Chief Executive Officer”.
“Our former Chief Executive Officer’s management style and temperament created a pressurized operating environment at the Company, where challenging targets were set and achieving those targets was a key performance expectation…Our former Chief Executive Officer further encouraged employees to focus on potential business risks and opportunities, and on potential financial or operating performance gaps, as well as ways of ameliorating potential risks or gaps, including through accounting reviews. This resulted in an environment which in some instances may have led to inappropriate accounting decisions and the failure to disclose information critical to an effective review of transactions and accounting entries, such as certain changes in accounting methodologies, to the appropriate finance and accounting personnel or our Board, Audit Committee, or independent registered public accounting firm”
This part of the annual report is clearly referring to ex-Hertz chief exec Mark Frissora, who turned in his resignation for “personal reasons” last fall. The rental car firm gave Frissora a contractually obligated $10 million payment and various other benefits upon his departure. Also of note, Frissora was paid more than $16 million in 2013, based on company performance numbers that now appear dubious.
Although this is entirely speculation, if this matter develops into a a full-blown accounting scandal, there is a chance that Mark Frissora will be the first test case for the new SEC clawback rules.
The other shoe to drop in this matter is, of course, how Caesar’s BoD will react if their new CEO ends up as a key player in an accounting scandal at Hertz.
It awaits to be seen whether shorts will be impressed.