Terry McCrann clearly advised the Herald Sun bosses to only go with the
$7 million figure for Frank Cicutto in Tuesday’s paper so today he was
busy justifying his argument and getting stuck into “the ‘quality’
Fairfax duo in Melbourne and Sydney” for using a figure of $14 million.

McCrann rather unfairly went after Mark Latham for having generous
super and criticising Cicutto’s payout when the PM also raised
eye-brows about it and it is Latham who is talking about reducing
political super entitlements.

Anyway, we can clear up the confusion about Frank Cicutto’s entitlements from NAB.

The $3.27 million termination figure included the 12-month non-compete
clause, six months notice period and 12-month payout which on paper
would have been closer to $4 million. McCrann was on the wrong train
claiming it was mainly the six months in lieu because that only comes
to $1 million.

However, Cicutto is free to work for a rival bank tomorrow because the
board hasn’t enforced the non-compete clause so it appears this
contract variation was used to reduce the termination figure from what
the contract stipulated.

So how do we then get to the Age/SMH headlines claiming a “$14 million payout”?

Firstly, there is $1.9 million in super although it is unfair to
include this because it has already been appearing in Frank’s annual
salary figures for years and he won’t get access to it for another
three years when he turns 55.

Then there is $1.3 million in deferred bonus from last year but that
has already been included when we all talked about Frank’s $7.5 million
package last year. Surely we shouldn’t double count it, although he
will actually receive the cash in the current financial year.

Then there is $3 million in long service and holiday pay. After 37
years with the bank, Cicutto was owed six months long service leave and
about 12 months in holiday pay.

Does anyone else think it a little odd that CEOs on multi-million
packages get holiday pay? What next, overtime for doing 12 hour days?.
Surely the contract should simply pay the bloke a lot of money to get
the job done and all this day counting and accruing of leave should be
forgotten about.

Cicutto was the CEO of $47 billion bank, not a clock-watching teller.
Does he really put requests in to HR for holidays? We hate to think how
much Frank Lowy and Rupert Murdoch will be owed in holiday pay and
long-service leave after 42 and 50 years respectively in the top job
working 12 hour days and rarely taking holidays.

That brings the figure to about $9 million and then you have Frank’s 1.6 million options mentioned in last year’s annual report.

Of these, he’s only being allowed to keep 900,000 but only 500,000 of these are in the money.

In 1999 he was issued 400,000 at a strike price of $28.23. However,
they only vest if the shares get to $36 and this looks unlikely given
that they expire on March 13 this year.

The 2000 issue are in better shape as that was 500,000 options at
$21.29 a share. They have already vested although the expiry wasn’t
until March 2006. Therefore, Frank will need to pay $10.64 million to
exercise these options which are now worth $15.5 million based on the
current price of $31.

That gives him a $5 million profit on the options.

Cicutto also owns 240,616 shares worth $7.5 million and it is fair to
assume these are probably from earlier options issues and he’s probably
about $2 million in front on these.

The papers appear to have excluded Frank’s base salary of $2 million a
year so he’ll receive about $700,000 for four months of service since
the September 30 NAB balance date.

Therefore, the final breakdown is as follows:

$700,000 for salary
$3.27m for termination
$1.9 million in super
$1 million in long service leave
$2 million in accrued holiday pay
$1.3 million in deferred bonuses
$5 million in profits on unexercised options
$2 million in profits on existing shareholding

Of this, we expect that the annual report will go with a figure of $9
million, although the cash actually going to Cicutto will be $7 million
and the tax man will take about $3 million of that so Cicutto will be
left with $4 million net.

He might need that NAB mortgage afterall to finish the $8 million mansion in Canterbury.