Two years removed from a painful SEC investigation into its accounting practices, the executive credited with restoring the financial reporting structure of Gerber Scientific Inc. will step down in June to become the top financial executive at a Bay State high tech firm.
And if the lucrative pay package that lulled CFO Jay Zager away from the South Windsor-based manufacturer is any guide, Gerber will have to ante up if it still wants someone of his caliber.
3Com Corp., a Marlborough, Mass.-based networking equipment firm where Zager heads next month, offered him a sizable pay increase. According to regulatory filings, Zager will draw an annual base salary of $400,000 and a minimum annual bonus of $260,000. He took a signing bonus of $200,000, and will also receive 500,000 stock options, and 300,000 shares of restricted stock in 3Com, which trades currently around $4.50 a share.
Ka-Ching
It’s a significant pay bump. In his last year at Gerber, company documents show that Zager drew a base salary of $300,000 and a bonus of $163,035, as well as 27,172 shares of restricted stock and 15,000 shares of stock options. Gerber shares trade currently around $10, which is down slightly from the share price at this time last year.
But big paydays are just the reality of the market for CFOs right now, particularly for experienced ones, said Patricia Bromme, the Hartford-based regional vice president for Robert Half International.
“In the last couple of years, we have seen much more movement among CFOs than we have seen in a long time,” she said. But even within the market for CFOs, Bromme called the package offered to Zager “very high-end and attractive” and said “we are not seeing too many of that level.”
The turnaround Zager engineered at Gerber may be one reason for the lucrative offer. The 57-year-old joined Gerber in February 2005 and is credited within the company as the person who spearheaded Gerber’s effort to remake its internal accounting and budget forecasting procedures.
The changes were sorely needed: Zager helped remake the role of Gerber’s CFO. He was hired while Gerber’s former CFO Gary Bennett was in the midst of settling a lawsuit by the SEC for improper accounting while he was at Gerber several years earlier.
In 2000 and 2001, Bennett and then-controller Bernard J. Demko mistakenly failed to account for $1.5 million in charges and then later tried to cover their mistake, the SEC charged. The misstated financial documents, from the fourth quarter of 2000, overstated the company’s profits by 100 percent. Both execs were ordered to pay $25,000 in fines and Bennett was barred from serving as the officer of a public company for five years.
Out The Door
Ironically, Demko, who remained with the company as a senior vice president, resigned days after Zager announced his jump to 3Com. That announcement was quietly tucked away in a filing with the SEC. Demko is expected to leave in early August. A company official declined to offer any more details.
Zager, a former exec at Digital Computer Corp. who holds a graduate degree from the Massachusetts Institute of Technology’s Sloan School, helped put in place both the team and the rules over Gerber’s financial reporting, said William Grickis, senior vice president and general counsel.
He brought into the company several lower level executives from companies like Lydall Inc., in Manchester, and Helix Technology in Chelmsford, Mass., which Zager left to join Gerber.
Zager also guided the company as it switched auditing firms to PriceWaterhouseCoopers from KPMG, which had audited the company’s books for years.
“Jay came into the company at a critical time, as it emerged from a painful SEC investigation,” Grickis said. “He helped improve its business model and efficiency and he was instrumental in bringing that about and the setting the pace of getting that done.”
Grickis added that the process for finding Zager’s replacement will be easier than the one which originally brought Zager into the firm. “It will not be anywhere near as difficult to find someone to take over [a] well-oiled machine.”
Gathering Referrals
In a phone interview last week, Zager said “the company in the last two years made tremendous steps forward and I think I leave it in far better shape than when I arrived.”
He said that he expects his replacement to come from outside the company, and that Gerber has already started gathering referrals for candidates.
In joining 3Com, Zager steps into a similar situation as the one he entered when hired by Gerber. His predecessor, Donald Halsted, was fired by 3Com, although he will remain with the company to aid Zager’s transition.
As far as Gerber goes, Grickis said “it’s not as though Abe Lincoln just left, we will find someone else.”
