Bank’s Stock Option Plan Gives Rise to Proxy Fight

A proxy fight broke out at the Pacific Commerce Bank’s annual shareholders meeting Wednesday over a plan to grant additional stock options to bank directors and officers.

Several shareholders criticized as improper a proposal to grant 123,802 more stock options to bank directors and officers because directors already controlled 40.7% of the bank’s 786,000 outstanding shares. The inclusion of non-employee directors in the plan, in addition to employee officers, also came under fire at the meeting held in Bonita.

A single-branch bank based in Chula Vista, Pacific Commerce Bank had assets totaling $44 million as of March 31.

The amended stock option proposal ended up being approved by shareholders in a 96,150-to-58,091 vote but only after the bank disallowed proxies representing the 15% stake in bank stock held by Mexico City investor Isaias Zapata Guerra. Directors, who are in control of more than 300,000 shares, were not allowed to vote on the stock option proposal.

Since Zapata Guerra opposed the amended stock option plan, his proxies could have spelled defeat for the proposal had they been allowed. Bank Executive Vice President Larry Miller said the bank disallowed Zapata Guerra’s votes because he acquired the shares without obtaining proper permission from regulatory authorities.

Larry L. Benthien, owner of less than 1% of the bank’s stock and a critic of the stock option plan, nominated himself for a board director’s seat but was defeated. Benthien owns a mobile home brokerage in Chula Vista.

“(Bank directors) already own 40.7% of the stock and control on an almost absolute basis any issue that would come before the bank,” said one shareholder who asked not to be identified. “It was never explained successfully why (bank directors) needed to have additional stock options to have even more control.”

Miller said he didn’t know precisely how many of the new stock options were for directors and how many were intended for employees but said the options were split about half-and-half.

Pacific Commerce Bank shares trade at about $7.50 each over the counter. The bank’s assets of $44 million on March 31 were up from $36.7 million a year previous. Full year net income for 1989 was $703,879, up from 1988’s $522,597.