Anyway you look at it, AT&T's CEO Dave Dorman will make out like a bandit after the proposed merger between AT&T and SBC Communications is finalized. On Friday, AT&T and SBC filed their proxy statements with the Securities and Exchange Commission disclosing details of Dorman's contract with the company.
When the $16 billion merger was announced in January, SBC and AT&T said Dorman would stay on as president of the newly combined company. But if he doesn't become CEO after SBC's current CEO Edward Whitacre Jr. retires, which is expected in October 2006 when Whitacre's employment contract ends, there's a strong financial incentive for Dorman to leave.
According to the filings, if Dorman leaves SBC within six months after the merger is completed, he will receive an exit package valued at roughly $32.3 million. Included in this package would be a $10.3 million severance payout; accelerated vesting of options valued at about $1.3 million; accelerated vesting of restricted shares valued at about $9.1 million; an annuity likely valued at about $2 million; and lifetime medical and dental benefits.
Also if he leaves within the first six months, he would start a three-year consulting contract with SBC in exchange for receiving 400,000 shares of SBC restricted stock. Based on SBC's closing share price of $24 on Friday, the deal would be worth $9.6 million. The restricted shares would vest over a three year period and the contract would bar Dorman from competing with SBC.
If he leaves six months after the merger closes, he wouldn't get the consulting gig or the 400,000 SBC shares. He also wouldn't get the $2 million annuity. But he'd still walk away with a package valued at roughly $20 million.
Wouldn't it be nice to be in Dave Dorman's shoes?