How Not To Deal With Executive Compensation

The following is a story of executive compensation gone awry.

In 2003, Unique Broadband Systems, Inc. (UBS), a public company listed on the TSX Venture Exchange, acquired a 51.8% controlling interest in Look Communications (Look), a telecommunications company that owned a band of telecommunications spectrum. UBS was a holding company, and Gerald McGoey was its CEO and a UBS director.

In May 2004, Gerald McGoey became vice-chairman and CEO of Look while retaining his role at UBS. Look paid UBS an annual fee of $2.4 million for Mr. McGoey's services.

The Terms of Mr. McGoey's Employment

Mr. McGoey had negotiated with UBS an employment contract providing him an annual compensation of US$360,000, an annual bonus at UBS's discretion, stock options and an indemnity for legal expenses except where there was cause. According to the employment agreement, if he was not re-elected to the board of directors or nominated as CEO, he was to be paid 300% of his base salary,