Independent chairman at KB Home
KB Home directors elected the company’s first independent chairman Thursday, selecting Stephen Bollenbach -- chief executive of Hilton Hotels Corp. -- to succeed longtime leader Bruce Karatz.
Bollenbach’s election is the latest in a series of steps the company is taking to improve its corporate governance after disclosure of stock option backdating last year. Karatz stepped down Nov. 12 after an internal probe determined that he had picked stock option grant dates that inflated the value of the options awarded to him and other executives.
Still, some think the Westwood-based home builder could have done more to improve its standing as a corporate citizen.
Director Ray Irani was reelected to the board at Thursday’s annual meeting over the objections of the California Public Employees’ Retirement System, the giant pension fund that owns less than 1% of KB Home’s shares.
Irani, chairman and CEO of Occidental Petroleum Corp., was head of the board’s compensation committee that signed off on the stock option grants under Karatz. During the last three years at KB Home, Karatz earned more than $232 million, much of that in stock options.
CalPERS has a policy of opposing chairs of compensation committees at companies from which the CEO has departed under an option-backdating cloud.
“It’s not that we weren’t in agreement with Mr. Irani’s credentials, but his reelection was out of alignment with our policy,” CalPERS spokesman Clark McKinley said. He added that CalPERS had endorsed nearly all of the policy changes sought by the home builder, including a proposal that passed Thursday requiring shareholder approval of executive severance agreements. The stock option scandal forced KB Home to restate seven years of financial results, accounting for $36 million in understated compensation.
Since succeeding Karatz in November, CEO Jeffrey Mezger has sought to assure investors that KB Home would make its policies more transparent and to ensure that the 50-year-old company’s “good name remains above reproach,” as he wrote to shareholders in the annual report.
KB Home has revamped its policy for granting stock to executives, putting the responsibility in the hands of independent board members instead of management.
Bollenbach, a former Walt Disney Co. chief financial officer, plans to step down as Hilton’s CEO at the end of the year after more than a decade in the post. He will remain a co-chairman of the Beverly Hills company’s board through 2010.
Other KB Home directors winning reelection Thursday were Ronald Burkle, founder of private investment firm Yucaipa Cos.; CBS Corp. President Leslie Moonves; and Luis Nogales, a former media executive who heads a private equity firm.
KB Home shares added 37 cents Thursday to $42.42. They are down 17% on the year amid a weak housing market and rising mortgage loan defaults.
