In the Dough : Pillsbury CEO Could Net $8 Million for 5-Month Stint

Philip L. Smith, departing chief executive officer of the Pillsbury Co., stands to reap nearly $8 million from his five-month stint with the food and restaurant company, according to a published report today.

That doesn’t include a pledge Smith won from Pillsbury this month, guaranteeing the equity in his $1.53-million house, said the Wall Street Journal report gleaned from merger documents and other filings.

During Smith’s time at Pillsbury, the company waged an unsuccessful battle against a hostile takeover bid by Grand Metropolitan PLC.

Smith, 54, said Monday that he plans to leave Pillsbury early next year when Grand Met takes over. He joined Pillsbury Aug. 1, giving up the job of chairman and chief executive at Philip Morris Co.’s General Foods Corp. unit. To woo him, Pillsbury made an offer that included $1 million in annual pay and substantial stock options, the Journal said.

Pillsbury’s agreement Sunday to accept a sweetened $5.68-billion, or $66 per share, takeover bid from the British conglomerate, means Smith will get even more.

As a Pillsbury stockholder, Smith will be able to tender 75,000 shares for Grand Met, the Journal reported. At $66 apiece, that holding would gross $4.95 million.

Company documents indicate that Smith had purchased 3,000 of those shares before joining the company, the Journal said. Upon the acquisition, Smith will be able to sell the other 72,000 shares, which had been awarded as long-term incentives, the Journal said, quoting an unidentified Pillsbury spokesman. The merger agreement provides that restrictions on stock options for all Pillsbury executives would lapse.

When he became Pillsbury chairman, Smith was guaranteed $625,000 base pay, plus a bonus of $375,000 for the year ending next May 31. Under an agreement that Pillsbury modified in November with Grand Met in pursuit, senior executives would receive double their salary and bonus as “liquidated damages” in any change of control. Thus, Smith would be entitled to an additional $2 million. He also would receive annual retirement benefits of at least $200,000.