Furniture Brands skewered for executive compensation - 29 May 2009

The typical analyst research note is not page-turning reading: Turgid prose, heavy on numbers and financial jargon.



This one was different.



In a March 9 report on Furniture Brands International, veteran analyst
Budd Bugatch of Raymond James took the company's management and board
to the woodshed.



The issue: Incentive payments to seven top executives, amounting to
more than $10 million, at a time when sales were shrinking and the
company was dipping into red ink. Bugatch called the pay "excessive,
unreasonable and disheartening."

"The company is not alone in the industry in dealing with hard times,"
wrote Bugatch. "But the leadership of this company — starting at the
boardroom and extending through the executive suite — is not, in our
opinion, acting responsibly or in the interests of all of the company's
stakeholders."



Disagreement about Furniture Brands' executive compensation practices
was one reason T. Scott King resigned abruptly from the company's board
of directors in February. King had been a member of Furniture Brands'
human resources committee.



The company defended the long-term incentive plan, which was established almost three years ago.



The payments were based on free cash flow, rather than on profitability
or the company's stock price. Furniture Brands executives have been
preaching the mantra that "cash is king" in a rough economy. The goal
of the two-year incentive program was to stabilize Furniture Brands and
position it for future growth, according to the company.



In any case, the payment of "extremely high bonuses" was the primary
culprit in forcing Furniture Brands to use $9 million in cash from
operations in the first quarter, Stifel Nicolaus analyst John Baugh
wrote this month.



The company's board of directors planned to re-evaluate the company's
executive compensation for this year and 2010, Chairman and Chief
Executive Ralph Scozzafava said this month during a conference call
with analysts. Scozzafava, who received a $3 million incentive payment,
defended

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