As part of a settlement involving a pair of shareholder lawsuits brought against The South Financial Group, founder and chief executive officer Mack Whittle will resign from the board of the Greenville, SC-based financial services company and South Financial will enact significant corporate governance reforms.
According to a Securities and Exchange Commission document filed Wednesday, South Financial has reached an agreement in principle to settle suits filed Nov. 7, 2008, by Vernon A. Mercier, and Nov. 26, 2008, by John S. McMullen.
The suits were filed in the weeks after Whittle “stepped down” from South Financial, the company he began in 1986, but not before taking a golden parachute estimated to be worth at least $12 million.
The suits alleged that South Financial’s board “improperly accelerated the retirement of and approved excessive compensation” for Whittle.
Whittle had originally been scheduled to retire by year-end, but that date was moved up to October 27, in order that South Financial might get $347 million in federal bailout money and Whittle would still be able to retain his lucrative buyout. Whittle’s payout would have been in excess of federal guidelines if he’d not left the company before South Financial received the government money.
South Financial lost $569 million in 2008 and saw its stock price fall from $15.67 a share to $4.31. It closed Wednesday at $1.20.
Under terms of the settlement Whittle will resign from the company’s board, effective as of the date court approval of the settlement becomes final and he will contribute $250,000 to assist South Financial in settling this matter.
Other highlights include:
- South Financial agrees that it will not nominate a former CEO of the company to its board for a period of two years after the departure of the CEO from South Financial;
- The board shall add an additional independent director to its board, one with a background in financial services;
- Fully 75 percent of South Financial’s board shall consist of independent directors;
- The chairman shall be independent, be elected by secret ballot of the board annually and shall be limited to four consecutive years of service as chairman;
- The board shall amend South Financial’s corporate governance guidelines so that the positions of chairman and chief executive shall be held by two different people. Whittle held both positions between 2005-2008.
In addition to Whittle, other defendants named in one or both of the suits were: Darla D. Moore, John C.B. Smith Jr., William P. Brant, J.W. Davis, M. Dexter Hagy, Michael R. Hogan, William S. Hummers III, Challis M. Lowe, John W. Pritchett, H. Earle Russell Jr., Edward J. Sebastian, William R. Timmons III, David C. Wakefield III, and William P. Crawford Jr.
As part of the settlement, $500,000 will go to cover plaintiff’s court costs, split between $300,000 cash and $200,000 worth of company stock, to be paid from the company’s Directors & Officers insurance policy.
So, if one reads this correctly, and that’s no mean feat given the legalese involved, Whittle made off with at least $12 million for helping run South Financial into the ground, and his punishment was getting kicked off the board and having to pay $250,000? Sweet work if you can get it.