Bank Mutual CEO would earn about $2.6 million in sale to Associated Bank

Reduced duties would trigger payout

Last updated on July 2nd, 2019 at 09:19 am

Bank Mutual Corp. president and chief executive officer David Baumgarten would receive about $2.6 million in compensation related to the acquisition of the Brown Deer-based bank by Associated Banc-Corp.

Green Bay-based Associated announced the pending $482 million deal last week. It is expected to close in the first quarter of 2018, after which time Baumgarten would become a consultant to Associated president and CEO Philip Flynn. Baumgarten will work in client retention, employee engagement and community activities.

Based on Bank Mutual Corp.’s executive compensation plans as laid out in its proxy statement, Baumgarten would qualify for the payment of change in control benefits, since his duties have been reduced.

“In particular, the change in control provisions in the company’s employment agreements have a ‘double trigger,’ which means that change in control benefits are payable to the executive only if the ownership or control of the company changes and, after such change, the executive’s compensation or duties are significantly reduced or altered or equivalent actions occur,” according to the proxy. “The company utilizes the double trigger because it believes that, while it is appropriate to provide some protection to key personnel in the event of an acquisition, those protections should be limited to situations in which actions are taken that substantially affect their compensation or employment.

“Upon any event of termination or a change in control, each executive will receive his or her earned but unpaid base salary and incentive compensation, as well as compensation for accrued but unused vacation time. In addition, depending on the manner of termination, each executive will receive additional benefits…”

Baumgarten’s 2016 salary including board service was $730,400, and he earned $233,100 in incentives based on company performance, $28,235 in other compensation, $48,011 in pension value, as well as 20,800 shares of restricted stock valued at $151,632, for a total of about $1.2 million.

In the event of a termination by Baumgarten due to the change in control, he would be eligible for about $1.4 million in base salary, $466,200 in incentive compensation, $120,288 in early vesting of stock options, $604,800 for early vesting of restricted shares and $40,790 in other benefits, for a total of $2.6 million. This does not include compensation related to his work for the bank and company boards.

If the bank terminates Baumgarten as a result of the change in control, he would get a two-year severance payment. In that case, he would receive $700,000 in base salary, $233,100 in incentive compensation and $40,790 in other benefits, for a total of $973,890. That same severance payment would go to Baumgarten again in 2018.

But Bank Mutual has a policy not to pay executives large sums upon completion of an acquisition that could be considered “parachute payments,” which would equal or exceed three times a person’s average annual total compensation over a five-year period immediately prior to the change in control.

“The committee believes it is important to have agreements, including change in control provisions, to provide security to the executive officers in view of their long-term dedication to the company, which the company, in turn, believes will facilitate those officers’ commitment and dedication to the company, especially in cases where company interests may otherwise diverge from a personal interest,” the proxy says. “The committee believes this is particularly important in the case of a potential acquisition. The change in control provisions utilize a ‘double trigger’ before benefits are payable because the committee did not believe it was appropriate to provide benefits simply upon the change in control if employment is not affected.”

Flynn also would be eligible for performance-based compensation of not more than $3 million for achieving goals relating to acquisitions and divestitures, as laid out in Associated’s proxy.

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Molly Dill, former BizTimes Milwaukee managing editor.