Certain industries have a reputation for being at least a little stodgy — steelmaking and metal manufacturing, for example. Others, like golf, have a certain pizzazz to them — and, like the airline business, can even keep the allure despite decades of rocky results. So who could blame a steel-company chief from trying to marry the glamour of the air and the green to the solidity of steel?
In any case, that’s the tempting conclusion from a series of transactions between Worthington Industries (WOR) — a leading maker of scuba tanks, helium-balloon kits and propane tanks, among other metal stuff — and John P. McConnell, its chairman and chief executive. According to the proxy Worthington filed last week, the transactions work out to payments of something like $473,709 from Worthington to entities affiliated with McConnell, and $73,932 going the other direction.
McConnell inherited at least the outlines of the arrangements from his late father, John H. McConnell, who founded the company (colorfully, by putting his car up as collateral for the loan he used to buy his first batch of the metal that would make him his fortune). The John H. McConnell Trust owns JMAC Inc., which in turn has aircraft lease agreements with Worthington Industries. And, while the proxy is silent on the specifics, presumably the trust is among the “beneficial ownership of certain family-owned businesses and common shares transferred to John P. McConnell” on the death of his father.
Under those agreements, Worthington Industries paid JMAC $214,230 in the 2011 fiscal year, “for airplane rental when Company-owned planes were not available…” JMAC paid Worthington $33,182 for similar services, and another John H. McConnell Trust entity (called McAir Inc.) paid the company $10,050.
If you’re curious, you can use the WSJ’s Jet Tracker to see where the Worthington aircraft has gone over the years (mostly fairly prosaic places, including Chicago, Detroit and Decatur, Alabama, but also West Palm Beach nearly a dozen times), as well as where aircraft owned by McAir flew (including such sunny spots as the Virgin Islands, New Orleans, and at least five locations in Florida). JMAC flights don’t seem to show up in the database.
Finally, at least in terms of flying the corporate skies, the company got another $30,700 from Blue Jackets Air LLC, which
“primarily provides air transportation services for the Columbus Blue Jackets, a professional hockey team of which John P. McConnell is the majority owner.”
It’s worth noting that John H. McConnell founded, owned and ran the Blue Jackets before his death in 2008. But the family’s sporting interests extend beyond the ice rink, to the putting green. In addition to the flight payments, Worthington Industries
“paid approximately $259,479 to Double Eagle Club, a private golf club owned by the McConnell family (the ‘Club’). The Company uses the Club’s facilities for Company functions and meetings, and for meetings, entertainment and overnight lodging for customers, suppliers and other business associates.”
As is customary, the proxy goes on to note that the golf-club payments “are no less favorable to the Company than those that are charged to unrelated members of the Club.” (That could still be pretty favorable, judging from the club’s website, which with glowing Midwestern faux-humility boasts of its”near-perfect surroundings.”)
To us, though, the arm’s-length disclaimer always raises a related question: Could the company really find no better deal elsewhere — and did it actually look? Note to golf clubs in the Columbus, Ohio, area: This may be your chance to win some business with a low bid (and do let us know how the company responds to your approach).
John P. McConnell is well paid by Worthington — his total compensation worked out to about $3.5 million last fiscal year, most of it in cash — and at less than half a million dollars, the aircraft and golf-club payments aren’t about to break Worthington Industries.
Still, the company is no sole proprietorship — McConnell controls something like 25% of the company’s outstanding common shares, which is enough to have a bigger say in the company’s operations than usual for a chairman-CEO, but still a far cry from making it a personal fiefdom.
We can’t help but wonder whether shareholders wouldn’t be better served by air travel and golf-related entertainment bought from truly independent third parties. But of course, then McConnell might miss out on the glamour of it all.
Image source: Worthington Cylinders website