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Vesting stock grants over time “may simply be a way of holding somebody to the company,” said Jim Fox, a principal with the consulting firm Fox Lawson & Associates. “It’s a pretty simple concept. It may look unreasonable because they may not be tied to a performance indicator and most stockholders want some performance associated with” the grants.
Yes, shareholders do expect a little performance in their shares. Nash Finch has been a consistent dividend payer, but the stock closed at $30.52 per share on the day Covington’s appointment was announced. Seven years later, the consultants ISS hired valued the Spartan merger to shareholders at $25.44 per share.
While the company under Covington did make some moves, including buying stores in the Omaha market and distribution centers to augment its network serving military facilities, there were no game-changing deals during his tenure. He did actually start down the path on one, approaching Spartan Stores in 2011. Rather than Nash Finch buying Spartan, however, it will be Spartan shareholders with most of the ownership of the combined company.
To be fair, the business of distributing food and related products to independent grocery stores has been under pressure since he got there. If there hasn’t been a stellar performance for the company’s shares, it’s also true that Covington didn’t emulate crosstown Supervalu by flying his company into the side of a mountain.
But shareholders should expect more than that for a $25.8 million payout.
They don’t have the right to stop it, but they do have right to be unhappy about it.
And the opportunity to say so.
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