When H&R Block suffered its worst tax season in at least four years, chief executive Bill Cobb stepped up to the problem.
“I own what happened,” Cobb told Wall Street analysts in June when the results became public, “and to that end I will not receive a performance bonus this year.”
H&R Block has revealed how much Cobb’s ownership of the problem cost him — $1,243,750.
The company’s proxy statement mailed to shareholders showed Cobb could have collected that much in a short-term cash bonus had H&R Block’s revenues and profits lived up to expectations.
And Cobb received no pay raise this year either, according to an H&R Block spokesman.
Compensation expert Paul Dorf said he rarely sees management miss out completely on potential payoffs and praised H&R Block’s board of directors.
“If they live up to what they said,” Dorf, managing director of Compensation Resources Inc., said, “the compensation committee has done a very good job.”
CEO compensation has been a hot topic for years and analysts increasingly are looking at the pay gap between average employees and the top executives.
Cobb didn’t own Block’s failings by himself. Four other Block executives similarly missed their short-term bonuses because of the bad tax season. The four collected nothing when a good year would have paid them $1.575 million in bonuses as a group.
The short-term cash bonuses fell to zero under the dictates of the company’s bonus plan that set targets for H&R Block’s revenues and profits for the year. Revenues fell short of the minimum by $21.8 million and profits by $41.9 million when rival Intuit’s TurboTax beat Block in the increasingly important digital tax market.
The executives continued to collect large salaries, big stock awards and various benefits that pushed their total compensation for the company’s fiscal year to levels similar to recent years.
Cobb, for example, collected more than $1 million in salary and $18,906 in other compensation. The salary was higher than the previous year, but the company said that was because the company’s recent fiscal year included an additional pay period compared with the prior year.
Cobb’s stock award for the year was recorded officially at $5.5 million worth of H&R Block shares. The value was based on the shares’ value when awarded in June 2015. The shares carry restrictions, and most of the shares won’t come under his control for three years. How many shares he receives at that point depends in large part on what happens to the company’s performance and the stock price in that time.
Substantial previous stock awards to Cobb did vest to his control during the fiscal year that ended April 30 and were covered by the proxy report to shareholders. Specifically, he gained control of 452,866 shares of H&R Block worth $13.4 million on the day they became his without restrictions. Other executives similarly collected previously awarded H&R Block shares worth between $233,000 and $2.68 million.
Last month, Cobb and the other executives collected additional shares from previous stock awards. The proxy said 102,367 vested to Cobb’s control on June 30, but it did not put a value on them. At the end of June, Block shares closed at $23, making those shares worth $2.35 million.
The other four executives gained control of 68,250 shares on June 30.