The directors are "in an odd position," said Brian Foley, a compensation consultant at Brian Foley & Co. . "They in effect serve at the pleasure of the controlling shareholder."
Caplin and Richey, among other directors, had outstanding loans from the company as of June 30, 2003, according to the company's October 2003 proxy report, an annual filing for shareholders. The loans, extended before the government banned the practice, were for the purchase of Fairchild stock. The loans could be called in when the directors leave the board, the company has reported.
Fairchild's chairman and chief executive, Jeffrey J. Steiner, has headed the firm since 1985.
(Mitsu Yasukawa For The Washington Post)
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_____Compensation Report_____
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The Region's Highest-Paid Executives (The Washington Post, Aug 16, 2004)
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Pay for XM Executives Modest as Stock Recovered (The Washington Post, Aug 16, 2004)
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Board Members, Executives and Family Members Can Still Benefit (The Washington Post, Aug 16, 2004)
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Expense Issue Draws Mixed Views From Companies (The Washington Post, Aug 16, 2004)
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Survey Estimates Values of Options, Excludes Exercises (The Washington Post, Aug 16, 2004)
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Top Compensation Packages
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Superlatives
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Trends
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Aerospace
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_____Live Discussion_____
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Monday, 3 p.m. ET: Washington Post staff writer David Hilzenrath and editor Mike Flagg will be online to discuss the 2004 executive compensation survey.
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Over the years, Steiner's pay at Fairchild has inspired protests by shareholders, including a lawsuit more than a decade ago that prompted him to make some concessions. Compensation analyst Graef S. Crystal devoted a chapter to Steiner in his 1991 book, "In Search of Excess: The Overcompensation of American Executives."
In a 1998 Washington Post story, Steiner said he was "very aware" of criticism leveled against his compensation. "But when I compare my own income with some of the advisers at investment banks who are far more junior and far less knowledgeable about finance than me, I don't feel so bad," he said.
In 2001, Steiner compromised further after Mario Gabelli, head of an investment firm with a big stake in the company, filed a statement with the Securities and Exchange Commission calling Fairchild's compensation structure "unwarranted" and threatening to vote against all nominees to the Fairchild board. Gabelli complained at the time that "Jeff has got to wake up."
For four of the past five years, Steiner has had the highest salary in a Washington Post survey of executive compensation at the area's publicly traded companies.
Over five years, Fairchild's stock severely underperformed an index of its peers in the aerospace and defense industries. While $100 invested in the peer group in mid-1998 would have been worth $129.76 in mid-2003, assuming dividends were reinvested, $100 invested in Fairchild would have declined to $19.96, Fairchild said in its most recent proxy report to the Securities and Exchange Commission, filed in October 2003.
However, during the fiscal year that ended June 30, 2003, Fairchild's stock climbed from $3.40 to $4.03 a share. It closed last week at $4, and the company turned a profit of $7.1 million during the quarter that ended June 30, 2004.
Loans and Advances
The limited disclosures in Fairchild's SEC filings, sometimes phrased in legalistic language, offer only a partial understanding of Steiner's transactions and the company declined to provide further details.
Fairchild paid $66,000 during fiscal 2003 for the upkeep of a Paris apartment owned by a Steiner family company, Fairchild reported. The apartment was used "from time to time" by Eric Steiner when he was traveling on business, the company reported. "Overall, we believe our cost for such apartment is less than the cost of similar accommodations for our business related travel."
