"Gossip Girl" Agency Alloy May Have Gotten a Little Too Creative With CEO Bonuses
The SEC took a look at the bonus compensation of Alloy Media + Marketing (ALOY) CEO Matthew Diamond and COO James Johnson and did not like what it saw. The pair were the only two top executives who received cash bonus awards -- $400,000 paid in 2009 for 2008's performance-- and the company failed to explain to investors how exactly they got those bonuses, the SEC noted.
Alloy is the ad agency that created Vampire Diaries, Gossip Girl, Sisterhood of the Travelling Pants, and a swathe of more minor book and TV titles featuring teenagers with more discretionary spending power than sense.
In a series of letters between the SEC and Diamond (pictured) between Nov. 25 and Jan. 14, the SEC asked why it was that Alloy had disclosed the kinds of things that executives get bonuses for, but not the specific financial targets they need to meet to get them:
... the description of how bonuses are determined under the Compensation Plan is not distinguishable from how your discretionary bonuses are determined. ... Please advise.The SEC is right. You can see Alloy's description of Diamond's compensation on page 13 of this SEC filing. He gets $1.2 million a year. It takes 21 pages of single-spaced type to describe all the different ways that Diamond et al. can get paid. But it doesn't give specific numbers or the exact financial goals to be met. It does conclude that they met them, however. The overall impression is that Alloy's board of directors intended to look at Diamond and Johnson's performance and then retroactively decided that they'd done well enough to merit this bonus in 2009:
The Compensation Committee determined that each merited a cash bonus of $600,000 equal to about 133% of their current base salaries and the long term equity incentive with a value of $1.3 million, equal to about 289% of their annual base salaries.Nice work if you can get it.
Diamond promised the SEC his company would be more detailed in its disclosures in the future:
... the Company will include in its compensation discussion and analysis disclosure of quantitative factors used by the Committee in determining CEO and COO bonus compensation, if any.The SEC was satisfied with his answer and the matter appears to be closed.