Three members of the close-knit Tennessee Commerce Bank board of directors have resigned, citing changes to the company’s executive compensation package.
Directors Winston Hickman, Regg Swanson and Fowler Low all resigned within the last week.
Swanson said in his resignation letter, “Their desire to attain compensation that I feel is excessive, based on information that I have obtained independent of the board, and the subsequent vote process which granted the compensation has violated my trust in the management of the bank.”
Low also expressed dissatisfaction with the process by which the compensation decision was made, stating that executive officers took actions out of line with company policies.
“It seems to me that the executive officers/directors have concluded that the board can be manipulated in whatever manner deemed desirable (by the executive officers). Indeed this compensation issue and the ‘vote’ as counted reflect as much,” wrote Low in his resignation letter. “I have to question whether we are a board of directors, — or a board of directed.”
Company CFO George Fort said Wednesday that that the compensation changes were made according to the company’s charter and bylaws, and in accordance with the advice of corporate counsel.
He added that the structure of the board’s compensation committee has changed since the decision was made. At the time the policy was passed, he said, the company’s “compensation committee” consisted of the entire board of directors. In response to director concerns, it is now smaller and does not include members of the executive team.
“The executive group had not gotten a raise in base compensation for three years,” Fort said. “Although the raise may have seemed like a lot to the dissenting board members, it was three years worth of raises.”
According to the changes, company CEO Art Helf and President Mike Sapp now earn an annual base salary of $400,000 each, up from the $190,000 figure cited in the most recent proxy filing. Chief Administrative Officer H. Lamar Cox now earns $350,000, up from $180,000, and Fort earns $335,000, up from $130,000. Stock options accompanied the increases.
The compensation changes were approved by the board in June and went into effect retroactively as of the beginning of January 2007. Fort said the vote was not unanimous, but declined to give a break-down.
According to Fort, the salary increases were made according to the recommendations of an Atlanta-based consulting company. The firm made its recommendations by comparing Tennessee Commerce to a group of peers, defined by factors including profitability, growth and shareholder returns. Fort declined to name the peer group companies, but said they are based both locally and nationally.
“They didn’t compare us to $200 million community banks that are growing at 6 percent,” Fort said. “You can’t find a lot of banks like us right around the corner.”
The board departures mark a period of transition for the bank, Fort said. Since the bank’s founding, Tennessee Commerce has gone public and grown from a $10 million bank to a $750 million bank. The company’s financial performance has earned local accolades, including being cited by The City Paper as a smart local investment.
“It’s much more strenuous to be on the board now than it was,” Fort said. “We’re left with a more streamlined board that is in sync with management and our plans for the future.”
All three members have been on the board since 2000. Prior to the departures of the board members, two other directors resigned — one married and left town, and the other became more heavily involved with other ventures, Fort said.
Compensation for board members also increased in 2007, Fort said, with directors currently being paid $3,750 per quarterly meeting. Those on the executive committee — including Hickman — receive $500-$750 for each one of eight additional meetings, Fort said.