International Game Technology, embroiled in a proxy battle with its former chief executive officer, said he received backdated stock options to capture almost $2.8 million in personal profit.
Charles Mathewson, who served as IGT’s CEO until 2000, engaged in “questionable” compensation practices “despite publicly trumpeting an annual salary of $1,” IGT said in a letter to shareholders today.
Mathewson and two others are the proposed nominees to IGT’s board by dissident investor Ader Investment Management LLC, a New York-based money-management firm. In public filings, the group said IGT management has lost focus on its core business and misallocated capital. IGT, based in Reno, Nevada, is the world’s largest slot machine maker.
“I would never backdate an option, I’m positive of that,” Mathewson, 83, said in a telephone interview. The compensation committee awarded the options and he said he believed they did so based on the day he was reappointed chief executive.
On May 13, 1996, IGT’s compensation committee approved a 1 million-share grant tied to the company’s $13.625 trading price on Feb. 20, the letter said. The price on the date of the grant was $16, making the award worth $2.38 million, according to the letter.
In August, the committee repriced the grant to an earlier date and a lower close, giving Mathewson an immediate profit of almost $400,000 more, the company said. He was appointed CEO a second time in February 1996, according to a filing.
In December, the committee decided to jettison the standard five-year vesting and made the full grant exercisable immediately, according to the letter.
“The board believes that Mr. Mathewson’s decidedly ‘old-school’ approach to corporate governance, which was driven by his own self-interests during his tenure as both CEO and Chairman, would not be in the best interests of shareholders,” the company said in its letter.
IGT’s annual meeting will be held on March 5.
Mathewson stepped down as chairman in 2003. IGT continued to pay for his staff, office space, and personal expenses, including $12,000 for fitness training and $400,000 for multiple country club memberships, at a time when the company was forced to fire workers, according to the letter.
He also sought $18,000 in reimbursements for his Bentley automobile and $560,204 related to maintenance of his personal airplane.
Country club memberships and other perks were used for corporate sales purposes or given in lieu of severance pay which he didn’t receive, Mathewson said. The aircraft expense involved a plane he purchased from IGT that required more maintenance than the company had disclosed, he said.
“They’re just stretching, real smoke and mirrors,” Mathewson said of IGT’s letter. “I am not interested in one nickel.”
IGT rose 1.2 percent to $15.55 at the close in New York. The stock declined 18 percent last year, its third straight annual drop.