Activist Bloggers Criticize John Hart Compensation – Part I

As originally appeared in Troubled Company Reporter.

PICO Holdings, Inc. (Nasdaq:PICO), based in La Jolla, Calif., is a diversified holding company reporting recurring losses since 2008. PICO owns 57% of UCP, Inc. (NYSE:UCP), 100% of Vidler Water Company, Inc., a securities portfolio and various interests in small businesses. PICO has $664 million in assets and $434 million in shareholder equity. Central Square Management LLC and River Road Asset Management LLC collectively own more than 14% of PICO. Other activists at http://ReformPICONow.com/ have taken to the Internet to advance the shareholder cause.

The activist bloggers strongly criticize the Compensation Agreement awarded to PICO CEO John Hart. In a post entitled, “John ‘The Juicer’ Hart Compensation Plan Betrays PICO Shareholders — Part I,” the bloggers lay blame squarely on the PICO Compensation Committee, comprised of Chairman Carlos Campbell, Michael Machado and Eric Speron.

The bloggers note that, under the Revised Business Plan, Mr. Hart has been stripped of the duties normally associated with a CEO, namely articulation of strategy, capital allocation and growth objectives. “After a lengthy track record of complete failure as a CEO, measured by any and all relevant metrics, Mr. Hart has about as much responsibility as a dog that fetches slippers.” Given Mr. Hart’s limited mandate, the bloggers wonder out loud why Mr. Hart should be paid a $1 million base salary.

Next, they observe that if terminated without cause, Mr. Hart would get cash of almost $11 million, plus exorbitant benefits and payments. “Such an obscene amount of money for a CEO who has driven a stock from $40 to $9 in 5 years, who is a complete failure by any and all relevant metrics, is insane.”

At the end of the Employment Term, in 5 years, Mr. Hart can be awarded an exit payment of $5 million, if he and PICO can’t come to agreeable terms on future employment. In response to this provision, the bloggers colorfully write, “We shake our heads. We just don’t get it. Does shareholder abuse at the hands of the PICO Compensation Committee have any limits? Is there one shareholder-oriented brain cell in the heads of Messrs. Campbell, Machado or Speron? Is this the PICO Compensation Committee or is this “The John Hart Luxury Retirement Committee?” Or perhaps “The PICO Shareholder Abuse Committee?” Even “Failure CEO Charity Committee?”‘

Continuing, the blog post assesses Mr. Hart thusly: “Mr. Hart is a complete failure as a CEO. His talent lies in placing small groups of sycophants in positions of financial control to award him large sums of other people’s money.” Turning to the PICO Compensation Committee, “Messrs. Campbell, Machado and Speron should be ashamed of themselves. They have betrayed the trust of shareholders.”

The activist bloggers finish, “We have a direct question for Messrs. Campbell, Machado and Speron: Please tell shareholders in your own words, why in your independent business judgement, the Hart Employment Agreement is beneficial for PICO and its shareholders?”