Mondavi Chairman Gets Bonus
The $2.5-million bonus the Robert Mondavi Corp. board has agreed to pay Chairman Ted Hall is raising the eyebrows of compensation experts who question its size and the vintner’s failure to explain it.
Mondavi, which last month agreed to a $1-billion acquisition by Constellation Brands Inc., disclosed the bonus Thursday in a Securities and Exchange Commission filing without comment. Company executives didn’t return phone calls Thursday.
Hall, the first person outside the Mondavi family to hold the chairman’s post at the Napa Valley winemaker, is a nonexecutive chairman who helps in long-term planning but isn’t involved in the daily management of the business.
A nonexecutive chairman almost never gets a bonus of any size, let alone one that runs into the millions, said Paul Hodgson, senior researcher at the Corporate Library, a Portland, Maine-based corporate governance research firm.
Typically, Hodgson said, nonexecutive chairmen of Fortune 500 companies earn $250,000 annually and rarely are awarded bonuses.
With $468 million in annual sales, Mondavi is one-seventh the size of Newmont Mining Corp., the smallest company on the Fortune 500 list. (Newmont doesn’t have a nonexecutive chairman.)
Both Hall’s bonus and Mondavi’s lack of elaboration in the SEC filing are unusual in an era when corporate scandals have encouraged companies to disclose more information about their moves rather than less.
“There is a lot of mistrust out there,” said David Leach, managing director of ECG Advisors, a Los Angeles compensation and corporate governance consulting firm.
Hall, a former McKinsey & Co. management consultant and owner of Long Meadow Ranch Winery in Napa, joined Mondavi’s board a year ago and became chairman in January. At the time, he negotiated a contract that pays him $600,000 a year in the form of a $50,000 monthly retainer fee, plus a $400,000 bonus, according to the SEC filing. The filing said his bonus for 2004 was raised to $2.5 million.
Hall was one of the primary architects of a controversial restructuring plan to reinvent Mondavi as a purveyor of inexpensive wine by selling off its landmark Robert Mondavi Winery in Oakville, Calif., and other luxury brands. That plan sparked a boardroom fight that pushed out of the company several Mondavi family members, including R. Michael Mondavi, the vice chairman.
The restructuring was scuttled when the board agreed to accept a buyout offer from Fairport, N.Y.-based Constellation, the world’s largest wine company.
Mondavi shareholders enjoyed a financial windfall from the sale. The price of $56.50 for Class A nonvoting shares was a 46% premium over the stock price before the offer.
“If the board feels he has been particularly instrumental in engineering the sale of the company, there might be some level of justification” for the bonus, Hodgson said. “But even then it is very unusual” and “if that is the case, they should explain it in the filing.”
Constellation declined to comment on Hall’s bonus. But the company did reveal some details about how it plans to manage Mondavi.
The high-end Robert Mondavi Winery will be placed under Franciscan Estates, Constellation’s luxury wine division. Other brands in that group include Simi, Mt. Veeder, Estancia and Ravenswood.
Mondavi’s Woodbridge, Robert Mondavi Private Selection and Papio labels -- all brands that sell for less than $15 a bottle -- will be integrated into Constellation Wines U.S.
In a Thursday memo to workers, Mondavi executives said they expected layoffs of sales and administrative workers in January. This year, Mondavi cut about one-third of its employees, slashing its workforce to about 700.
