FBG, thanks for the considered reply. I have done some digging to determine the RSU/ option share % DOC has in ADXS. What I've found is interesting. I welcome your evaluation of the accuracy and implications of the information below.
The following are the RSU's purchased out of base salary compensation as listed in ADXS's 10K for FY2016:
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Executive $Value # of shares
Daniel J. O’Connor $99,404 12,001
From 2013 to present, in addition to the purchases of Common Stock set forth in the above table, Mr. O’Connor has also purchased an additional 164,909 shares of Common Stock out of his personal funds at the then market price for an aggregate consideration of $689,004. These purchases consisted of the conversion of amounts due to Mr. O’Connor under a promissory note given by Mr. O’Connor to the Company in 2012 of approximately $66,500 for 21,091 shares, 2013 base salary which he elected to receive in Common Stock of approximately $186,555 for 34,752 shares (21,489 on a net basis after employee payroll taxes), 2013 and 2014 cash bonuses voluntarily requested to receive in equity of $214,359 for 62,064 shares (57,990 on a net basis after employee payroll taxes), fiscal 2014 voluntary request to purchase stock directly from the Company at market price purchases of $68,750 for 21,687 shares (15,950 on a net basis after employee payroll taxes), fiscal 2015 voluntary request to purchase stock directly from the Company at market price purchases of $88,840 for 8,482 shares (7,556 on a net basis after employee payroll taxes), and purchases of the Company’s Common Stock in the October 2013 and March 2014 public offerings of 13,500 shares for $54,000 and 3,333 shares for $10,000.
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Thus, DOC has taken a significant amount of his compensation in RSU's at market price. That's about as shareholder friendly as it gets: saves precious cash for shareholders to invest in the business while being 100% non-dilutive.
Then, from the 14A Filing for the shareholder's annual meeting, we have the following (I have edited to allow the table so it would be readable):
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Summary Compensation Table
Salary(1) Bonus(2) Stock Award(3) Option Award(4)
DOC 2016 $464,224 $1,277,500 — $4,821,006
2015 $345,986 $170,625 — $11,790,326
2014 $340,603 $58,167 $1,007,500 —
(1) Pursuant to their employment agreements, each of the named executive officers voluntarily purchased restricted stock directly from the Company at market price with their personal funds in predefined amounts ranging in amounts equal to 5%-25% of the individual’s salary. These purchases are not required or requested by the Compensation Committee.
(2) Represents annual incentive bonuses for services performed during the fiscal year. The named executive officers were entitled to receive these bonuses in cash, however, for fiscal years 2015 and 2014, each of the executives voluntarily requested to be paid a portion of their bonus in shares of our Common Stock. 2016 values also include a special one-time bonus for Mr. O’Connor, Dr. Petit, Ms. Bonstein and Mr. Mayes in conjunction with the Amgen collaboration.
(3) Reflects the aggregate grant date fair value of restricted stock units determined in accordance with FASB ASC Topic 718
(4) Reflects the aggregate grant date fair value of stock options determined in accordance with FASB ASC Topic 718. The assumptions used in determining the grant date fair values of the stock options are set forth in the notes to the Company’s consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended October 31, 2016 filed with the SEC.
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In addition, the 14A filing indicates that DOC holds options on 1,122,734 shares of ADXS.
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Putting the above information into perspective....
DOC has been granted options on 1,122,734 shares, which is about 2.8% of outstanding shares. This is below the 3-5% range I suggested as a standard for small, early-stage (pre-revenue) ventures such as ADXS. The strike price of those options averages $12.03. So, the current value of DOC's options is $0.
As for RSU's given by grant, the only evidence I can find is the $1,007,500 based on 250,000 RSU's granted in 2014. That amount (about 1% of outstanding shares at the time) hardly seems egregious by any standard as a reward for raising over $30M in new equity since he had become CEO in August 2013 and putting the company's development efforts on a solid footing. It is important to differentiate between REWARD for accomplishments (RSU grant) and INCENTIVE for future accomplishments (stock option grants). RSU's were a less-dilutive way of rewarding Dan than providing what would have been an equal value of options (i.e., which more have required granting more future shares).
One last point worth making comes from the 2/10/2017 annual shareholder 14A Filing...
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The Compensation Committee reviews the performance and compensation of our Chief Executive Officer and establishes his compensation level on an annual basis. The Committee also reviews the performance and approves compensation annually for the other executive officers, after considering the recommendations of the Chief Executive Officer.
In the past, we have utilized the services of a compensation consultant to review our policies and procedures with respect to executive compensation, and to provide market data regarding competitive pay practices. We engaged Hewitt Associates LLC, operating as Aon Hewitt, a compensation consultant, in January 2015, to perform a compensation program review and market analysis, as well as provide recommendations regarding adjustments to executive officer base salaries, target bonus opportunities and long-term equity incentives. The Compensation Committee used this information as a guide in determining base salary adjustments, bonus opportunities and long-term incentive award levels for our named executive officers for fiscal 2016.
Market Data
With Radford’s assistance, we collected and analyzed compensation market data to be used as a resource in setting fiscal 2016 compensation levels and to review the competitiveness of our compensation programs. Data sources included public company proxy statements as well as proprietary compensation surveys and other surveys that have benchmark compensation information. We selected peer companies from the public biotechnology space based upon sector focus, stage of clinical development, market capitalization and number of employees. For fiscal 2016, we reviewed compensation data of the following peer companies for these purposes: Aduro BioTech, Inc., Agenus Inc., Aratana Therapeutics, Inc., Ardelyx, Inc., Bellicum Pharmaceuticals, Inc., Coherus Biosciences, Inc., Flexion Therapeutics, Inc., Geron Corporation, Inovio Pharmaceuticals, Inc., Karyopharm Therapeutics Inc., La Jolla Pharmaceutical Company, Lexicon Pharmaceuticals, Inc., Northwest Biotherapeutics, Inc., OncoMed Pharmaceuticals, Inc., Revance Therapeutics, Inc., Sorrento Therapeutics, Inc., TG Therapeutics, Inc., XBiotech, Inc.
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This information suggests that the BOD has been very diligent in making sure DOC (and other exec) compensation, whether base salary, bonus, or incentive is within competitive bounds.
Please correct anything in the above that is either wrong or incomplete. But, bottom line, the charge that DOC has rewarded himself egregiously or at the expense of other shareholders simply does not hold water based on the facts, as far as I can determine them.
I think DOC has more than earned his total compensation. Obviously, the ultimate outcome; i.e., a substantial return on shareholder equity, is still to be seen. However, DOC has been in place only 3 1/2 years, which is FAR too short a time period to judge his success on the metric of increased shareholder value. Judging him by what is meaningful at this stage: capital raising, clinical progress, and meaningful partnerships, there is no question he has done an outstanding job.
