Attorneys for the Arizona Commerce Authority are poring over outgoing CEO Don Cardon’s contract to see whether the agency can recoup a $50,000 signing bonus he received, and will likely put safeguards into his successor’s contract to make sure it won’t be a question next time.
Cardon’s contract was controversial to begin with, but his decision to leave the ACA less than a year into a three-year contract is putting pressure on the agency and Gov. Jan Brewer to recoup the money. A spokeswoman for Cardon also said the outgoing chief is considering whether he’ll return some or all of the cash.
The $300,000-a-year contract Cardon signed in late August included a plethora of perks and incentives, including the signing bonus, a generous car allowance and cash for health care expenses.
Mary Peters, chair of the ACA’s compensation committee, which drew up the contract, said attorneys and the committee are trying to determine whether Cardon’s unexpected announcement has any ramifications on his contract, including whether he’s required to give back the bonus.
Under the terms of the contract, the ACA was required to pay Cardon the $50,000 signing bonus within 30 days of him signing the contract. The contract states that Cardon can terminate the contract at any time, but the resignation section makes no mention of the signing bonus or whether he would be required to return it under any circumstances.
Peters said the contract review did not necessarily mean the ACA is trying to recoup Cardon’s signing bonus, but that is one aspect the attorneys would look at.
“I want to get together with the attorneys and go over Don’s contract and find out what specific options we have, given that … none of us had expected him to step down from the position this quickly,” said Peters, the president of Mary E. Peters Consulting Group. “I wouldn’t say we’re looking to not pay him, but obviously we want to look out for the citizens of Arizona.”
Peters said she would know within a couple weeks whether the ACA has any recourse regarding the signing bonus.
Cardon, who agreed to stay at the ACA for up to six months while the board of directors searches for a successor, is holding off on making any decisions about the bonus. ACA spokeswoman Kristen Hellmer said it’s possible that he would give back the bonus voluntarily, but that his decision may be based, at least in part, on the attorneys’ recommendations.
“Don wants to take into account any recommendations made by the committee and the attorneys, but that will not be the sole basis for his decision,” Hellmer said.
Cardon did not return a message left for him with the ACA.
The questions put Brewer in a political bind. The governor championed the creation of the ACA and helped convince Cardon to stay on as CEO after the official transition from the old Department of Commerce. During a recent interview on Channel 12’s Sunday Square Off, Brewer said the issue of Cardon’s signing bonus was under discussion.
“I think that’s something that we need to give a thought to and something that he probably will consider,” she said.
Brewer spokesman Matthew Benson said the governor hasn’t taken a position on Cardon’s signing bonus and is waiting for more information. Benson said she and the ACA will probably know something definitive in early February.
“Step No. 1 is to find out contractually what the obligations are to Mr. Cardon,” Benson said.
The questions over Cardon’s signing bonus didn’t sit well with lawmakers who weren’t comfortable with the creation of a public-private ACA in the first place. Rep. Eddie Farnsworth, one of the few Republicans to vote against the omnibus tax bill that created the agency, said the issue should’ve been settled in the original contract.
“I don’t think anybody clarified that on the front end,” said Farnsworth, R-Gilbert. “It certainly brings up some of the concerns that I had when I opposed the ACA.”
And the issue was red meat for Democrats who lambasted Brewer and the ACA for giving Cardon a massive contract after cutting hundreds of millions from education, Medicaid and social services. House Minority Leader Chad Campbell was adamant that Cardon should give back the signing bonus.
“This whole thing is ludicrous. The fact that he got that package in the first place was a slap in the face to the taxpayers of this state,” said Campbell, D-Phoenix.
If Cardon’s contract doesn’t require him to give back the bonus, his successor’s might. Peters said the ACA will probably include a “clawback” provision in the next CEO’s contract stipulating how long he must serve to keep the bonus.
Peters said such provisions are standard in the private sector. “If that’s not in the contract I think that’s certainly something we would want to consider, because every time I’ve been fortunate enough to get any kind of signing bonus,” there was a clawback provision, Peters said.
Rep. John Kavanagh said he’d like to see a clawback provision in the next contract, as long as it follows industry standards.
“I don’t want to craft an outlier contract that will scare away competent people, but on the other hand I don’t want to give away the store,” said Kavanagh, R-Fountain Hills. “There are many people who believe that executive salaries in what could best be described as the quasi-private sector, including charitable organizations, are excessively high.”
Kavanagh’s concerns over Cardon’s contract were echoed repeatedly last year when the terms were announced. In addition to the $300,000 annual salary and the signing bonus, Cardon also received a $1,000-a-month vehicle allowance, a $30,000 “wellness/health allowance,” and was eligible for “discretionary bonus” of up to 25 percent of salary.
Peters said Cardon has not received a discretionary bonus. Cardon and the compensation committee have not yet finalized the requirements for the bonus, she said.
While Cardon’s contract was controversial, his successor’s contract may not be as politically unpopular because taxpayers won’t foot as much of the bill. At the authority’s Jan. 11 meeting, Co-chairman Jerry Colangelo announced that Team ACA, a private-sector fundraising wing of the ACA, would pay for half of the CEO’s compensation package.