Policy group criticizes Mercury Marine owner over taxes, executive pay

Oct 14, 2009 (Milwaukee Journal Sentinel - McClatchy-Tribune Information Services via COMTEX) -- BC | Quote | Chart | News | PowerRating -- Brunswick Corp., the parent of Fond du Lac-based Mercury Marine Inc., should have come under closer scrutiny before state and local government officials offered incentives to keep Mercury in Wisconsin, a liberal public policy group said Tuesday.

In September, the Fond du Lac County Board gave Mercury a $50 million government-financed loan, one of a basket of incentives the outboard engine maker received when it threatened to move hundreds of manufacturing jobs to Oklahoma. About 2,000 Mercury jobs were at stake had the company moved.

State officials also prepared financial incentives aimed at retaining Mercury, although they haven't released the details.

"The incentives package is definitely going forward" but isn't complete, said Tony Hozeny, Commerce Department spokesman.

Brunswick, through Mercury, asked for government help and worker concessions after falling on hard times in the recession.

Many people are paying for Brunswick's failures, including taxpayers, shareholders and Mercury employees, according to the Institute for Wisconsin's Future, a nonprofit organization that does research on economic issues.

Brunswick did not pay corporate taxes in Wisconsin from 2000 through 2007, said Jack Norman, the Institute's research director.

"It's a reasonable thing to look at when deciding whether a company should be given help," he said.

Norman also was critical of Brunswick's leadership, saying the company's stock price has fallen more than the stock market as a whole, yet the leadership hasn't been fired or taken pay cuts.

Nationwide, Brunswick has eliminated thousands of jobs and closed more than a dozen boat-building plants.

Yet chief executive Dustan McCoy's base salary of $906,000 in 2007 and 2008 was up from $800,000 in 2006, his first year as CEO. McCoy and other executives took a 20% cut in their base salary for two months in 2008, but McCoy's base salary this year remains at $906,000.

Also, Brunswick's board of directors was largely insulated from pay cuts, according to the Institute.

"In short, Brunswick stakeholders have borne the consequences of corporate malfunction. Taxpayers are footing the bill for incentive packages; shareholders have seen most of their investment lost; both unionized employees and managers have lost jobs, incomes and bonuses," the Milwaukee-based group said.

Full compliance

Brunswick is in full compliance with Wisconsin tax regulations and has a $175 million annual payroll in Wisconsin, according to the company.

Mercury purchases $178 million in products from other Wisconsin businesses, and 11,000 Wisconsin jobs worth more than $590 million annually are linked to the company's presence here, company officials said.

Fond du Lac County officials say they did not consider McCoy's salary or directors' pay in their decision to establish a 0.5% sales tax to finance a loan to Mercury.

"There's no doubt that we made sacrifices. But the sacrifices would have been greater if the company had left," County Executive Allen Buechel said.

The Commerce Department also did not consider executive pay or corporate income taxes in its decision.

"We were focused on the creation and retention of jobs, a commitment to growth, and keep a marquee company in Wisconsin," said Zach Brandon, Commerce Department executive assistant.

Brunswick's top executives have been affected by the downturn, according to analysts who cover the company. Part of their compensation is based on stock options that are essentially worthless now, said analyst Hayley Wolff with Rochdale Securities.

Recreational boat sales have fallen from more than 300,000 units a year only a few years ago to an estimated 130,000 units in 2009, according to industry figures.

"Clearly this industry has contracted at a pace that no one thought was plausible," Wolff said.

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