Instructure Set Up $25 Million Stock Payoff for Bosses Amid Sale

(Bloomberg) -- Three top executives at Instructure Inc. may reap more than $25 million from stock awards granted shortly after a potential buyer privately approached the educational software maker early this year.

Two weeks after the suitor made a nonbinding offer in January, directors on Instructure’s compensation committee enacted a new policy for rewarding the company’s most senior employees, turning their cash bonuses for 2018 into a package of restricted stock units that was 25% larger, according to the company’s filings. The panel also discontinued cash bonuses through 2022 in favor of new, long-term stock grants for executive officers. And it gave all staff the option of receiving 20% of their base salary in equity.

The shift -- which the company says was in the works months before buyers began circling -- positioned Chief Executive Officer Dan Goldsmith, Chief Financial Officer Steven Kaminsky and General Counsel Matthew Kaminer to receive more compensation in the form of stock at a time when it could surge in value. Since the policies were adopted Jan. 23, shares of Salt Lake City-based Instructure have outperformed the broader market, gaining 23% as it reached a deal to sell itself. Some of the stock has already vested, and when combined with what’s left, the trio is set to reap a cash windfall of more than $25 million, even as Goldsmith and Kaminer give up half of the unvested portion of their RSUs in light of the accelerated payout.

The board urged shareholders earlier this month to approve a $2 billion all-cash bid by Thoma Bravo. In a Dec. 23 regulatory filing, Instructure revealed that it had spoken with various suitors, noting that an initial bidder, identified as “Sponsor A,” kicked things off with an unsolicited offer of $53 to $55 a share in early January. The shares were trading around $40 at the time.

The compensation committee’s decisions later that month “were the culmination of discussions over multiple board meetings dating back to the fall of 2018,” Ross Lovern, a spokesman for the company, said in an emailed statement. “It is important to note that the opportunity to convert cash compensation into RSU grants was made available to all Instructure employees,” he said of the option to convert some salary into stock.

The filings show that the three executives elected to receive 20% of their salaries in stock. Lovern said that was mandatory for senior executives and managers starting at the rank of vice president.

The compensation committee worked with advisers when overhauling pay practices to incentivize value creation for shareholders over the long-term, a person with knowledge of the matter said. When enacting the changes, the committee considered the company’s strategic goals and a variety of other information, including the then-preliminary nature of any takeover talks, the person said.

In May, Instructure hired Goldsmith’s sister as chief strategy officer, awarding her a long-term stock incentive of $3.59 million, according to a filing. The appointment was approved by the audit committee. She reported to Kaminer, not her brother, the person said.

To contact the reporter on this story: Gillian Tan in New York at gtan129@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, David Scheer, Daniel Taub

©2020 Bloomberg L.P.