Serving Two Masters? Poberezny Up For Election, May 20th, for Garmin Director

Both Garmin and EAA President Tom Poberezny have confirmed reports of the EAA leader's nomination for a Director's slot on the board of Garmin Ltd. Rumors surfaced earlier this week as a result of inquiries to ANN from members of the avionics and EAA community who were concerned about the potential for a conflict of interest.

Garmin told ANN, Tuesday, that "Tom Poberezny is a candidate for election as a director at our May 20 shareholder's meeting." Poberezny's election would make him part of an elite 6 person Board that guides the consumer electronics and avionics superpower -- which reportedly has made other members of the avionics community somewhat nervous.

A proxy statement from the Cayman Islands' based electronics company describes the upcoming May meeting as a, "special court-ordered meeting (the 'Special Meeting') of the shareholders of Garmin Ltd., a Cayman Islands company ('Garmin Cayman'), will be held at 9:00 a.m., local time, on May 20, 2010 at the Ritz Charles, located at 9000 West 137th Street, Overland Park, Kansas, 66221, USA. Following the Special Meeting, the Annual General Meeting (the 'Annual Meeting') of the shareholders of Garmin Cayman will be held on the same date and at the same location at 9:30 a.m. local time, or as soon thereafter as the Special Meeting concludes.

The highpoint of the Special Meeting will be to "consider and vote upon a proposal for a redomestication (the 'Redomestication') that would change the place of incorporation of the ultimate parent holding company of the Garmin group from the Cayman Islands to Switzerland through a scheme of arrangement (the 'Scheme of Arrangement') filed with the Grand Court of the Cayman Islands."

That done, two Director slots are up for election... one a re-election (Gene M. Betts, who has been a director of Garmin since March 2001) and the other, Poberezny's. Poberezny is being nominated as a Class I director to hold office for a three-year term expiring at the annual general meeting in 2013. Garmin's Proxy Statement notes that, "The Board of Directors has concluded that Mr. Poberezny should be nominated to serve as a director of Garmin Cayman because:

(1) his significant experience and relationships in the field of general aviation provide the Board of Directors and Garmin Cayman with valuable experience and contacts in one of Garmin Cayman's principal business segments;

(2) his 20 years of experience as President of the EAA, an organization with approximately 160,000 members and 200 employees, has provided him with significant hands-on experience as a chief executive;

(3) he meets the requirements to be an independent director as defined in the listing standards for the NASDAQ Global Select Market; and

(4) he satisfies the general criteria described below under 'Nominating and Corporate Governance Committee.'"

Poberezny spoke to ANN late Thursday during a scheduled meeting of approximately a dozen "industry leaders" including Aspen's John Uczekaj and Honeywell's Rob Wilson. Poberezny assured ANN that he had discussed the Garmin position with a number of industry players and noted that "concerns varied" among those he spoke to... but that he had made it clear that he would recuse himself form any EAA discussion-making that involved Garmin. Poberezny told us that most of the concerns differed between "those who know me and those who do not," but be believed that he has put most concerns at rest. He reported that Garmin came to him late last year with the offer and that he accepted their invitation and looked forward to the meeting on May 20th.

Tom claims that most of those he spoke to, "...know me and believe me to be fair," and that he expected that EAA and he would 'ultimately  benefit' from the Garmin affiliation. Poberezny spoke of "Broadening my perspective... the only organization I have real experience with (at this level) is with EAA," while adding that the experience and networking involved in this position were sure to offer him and EAA some "unique opportunities." Still, Poberezny admits that, "boundaries will need to be monitored" and that his staff will be briefed on maintaining the proper "distance" between EAA interests and Garmin's. Poberezny added that his upcoming effort to find and place a successor has had no bearing on the decision to take the Board slot at Garmin.

ANN's research and consultation with a leading business expert suggests that Tom's efforts will be well-rewarded. As we understand it, upon election, Tom will receive $59,000 plus T&E expenses in cash. He will also receive options equal to four times the base retainer ($50,000) divided by the FMV (Fair Market Value) of the stock. Based on current conditions, he would receive options on 5,329 shares of Garmin stock (app. $200,000/$37.53 at today's stock price).

This compensation occurs annually. The options are reportedly the 'wild card' since the stock has to appreciate for the option to be worth anything (and in this economy, please note that this can be quite the crap shoot...--E-I-C). For instance; if the stock were to double, then Poberezny could receive $200,000 of gain for an annual compensation of $259,000. Mind you, if the stock 'tanks' then his options are worthless, and his compensation for being a Director is simply the cash portion of $59,000.

Industry reaction to the Garmin gig seems a bit more mixed than Poberezny has reported... with a number of avionics interests cautiously admitting that they were "...nervous about possible favoritism, especially in regards to AirVenture/Oshkosh." One avionics industry personality, speaking to ANN on background, seemed as worried about the "appearance of a conflict of interest as the actual possibility of a conflict. Garmin has become the 600 pound gorilla out here and we're not sure what they think they can gain with putting Poberezny on the board. Obviously, we hope this does not result in an unfair advantage, but Garmin doesn't do anything that doesn't add to their stature. They're a big company used to getting what they pay for."  

The perception issue is a touchy one, and the fact that former AOPA President Phil Boyer has confirmed that AOPA's Board structure would not have allowed their leadership to join Garmin's board only adds to the confusion about Poberezny's decision to join Garmin while still such a pivotal part of the EAA Leadership. Boyer has some experience with this issue, as he joined the Board of Aspen Avionics after he officially retired from AOPA and left the responsibilities for leading that organization to his successor.

ANN is awaiting additional industry reaction and will report more as the details are developed.

FMI: www.eaa.org, www.garmin.com