Corporate Governance Rundown-Waterstone Financial Inc. Analysis

CorporateGovernance Rundown-Waterstone Financial Inc. Analysis

CorporateGovernance Rundown-Waterstone Financial Inc. Analysis

Gordonserved as the CEO and President of Lamplighter Financial, MHC, whichis a holding company of Wauwatosa Holdings, Inc. since 2007. He isalso the senior executive and President of Waterstone Bank, which isa subsidiary of Wauwatosa Holdings since November 2005 (‘WaterstoneFinancial Inc. Board of Directors,’ 2016).Earlierpositions he occupied include Chief Operating Officer of WaterstoneFinancial, Inc., Wauwatosa Holdings, and Waterstone Bank, ExecutiveVP and Chief Lending Officer at Security Bank S.S.B, as well asmanagement of real estate investments. Patrick Lawton, chairman ofthe company, has filled a similar position at Lamplighter FinancialMHC. Not only is Lawton the chairman of the board of directors, butalso the director of the organization (Waterstone Financial) andWaterstone Bank since 2000. Michael Hansen, an independent director,is an investor and majority shareholder of various companies such asJacsten Holdings LLC, Mid-States Contracting, Inc., Midwest MetalsLLC, and Eagle Metal Finishing LLC (‘WaterstoneFinancial Inc. Board of Directors,’ 2016).Mr. Schmidt is an experienced entrepreneur with a broad communitycontact, especially in areas served by Waterstone Bank. Thomas Dalumis the founder of Utility Equipment Leasing Corporation (UELC) andits chairman as well. He further worked as the Director of ProhealthCare, Inc. Kristine was the Vice President, Senior Vice President,and Chief Administrative Officer at Wisconsin Energy Corporation inher three decades tenure(‘WaterstoneFinancial Inc. Board of Directors,’ 2016).Ellenis credited for bringing about positive changes while working as thePresident of Divine Savior Holy Angels High School. She also heldvarious positions at different educational institutions.

Theaudit committee is composed of four members: Ellen Bartel (Directorand Co-Chair of Nominating and Corporate Governance committee),Kristine Rappe (Director and Co-Chair of Executive Committee), ThomasDalum (Director and Co-Chair Compensation Committee), and MichaelHansen (Director and Chair of Audit Committee) (WaterstoneFinancial, 2016). Thecommittee is responsible for monitoring the financial statements andinternal control to ensure that they comply with the legal andregulatory frameworks. The compensation committee, which is composedof four members of the board reviews and determines the executivereimbursement of Waterstone Financial, Inc. and recommends to theboard of directors. The nominating committee consists of threemembers (WaterstoneFinancial, 2016). Itis responsible for finding out the slate of director nominees forelection to the Board of the Company and candidates to fill positionsappearing between the Annual General Meetings (AGMs).The corporategovernance committee also has three members and works side by sidewith the nominating team(WaterstoneFinancial, 2016). Theexecutive committee has four members who mainly perform advisoryduties, that is, counsel the company’s board of directors tofortify the decision-making exercise.

Allthe committees constitute senior or top level management. Thestability of Waterstone Financial, Inc. can be linked to the wealthof experience and intelligence of the top management and executives(‘WaterstoneFinancial Inc. Board of Directors,’ 2016).For example, the CEO, Douglas Gordon with over two decades in thefinancial institutions industry and 15 years in the Security Banksector is strategically positioned to steer Waterstone Financial,Inc. to greater heights. The senior management of the organization isresponsible for directing and planning the various tasks, monitor andmake corrective measures when required. For example, they aremandated to approve different crucial and confidential requests ofthe company, budget management among others. Therefore, all theexecutive members are ideally suited particularly due to their yearsof working that span over a decade.

Mattersconcerning compensation operate in line with the company’s guidingprinciples. The general philosophy is to provide crucial executivecompensation, which is competitive in the market and based on theorganization’s operation and the workers’ personal contributionand output (&quotWaterstoneBank, SSB. – Compensation Committee Charter&quot, 2016).Furthermore, the executive compensation policies of Waterstone areaimed at motivating and rewarding executives for long term tacticalmanagement, as well as the improvement of shareholder value via cashpayments and equity incentives. Moreover, the objectives of thecompensation are to attract and retain skilled managers viacompetitive packages, result to extraordinary dedication from themanagement through effective incentive opportunities and add to theshort and long run interests of the shareholders.

Themetrics of determining the compensation of the CEO of WaterstoneFinancial are sound. The main compositions of the compensationinclude base pay, bonus, stock award value, and option honor. Thereis a rising trend on revenue of the business shownfrom 2013, whichcan partly be attributed to the growing stock price. The high revenuecollected plays a big role in determining the compensation of theCEO. Such a positive pattern is a clear indication of Gordon’srapid increase of the total compensation from 2014 to 2015 (&quotWSBFWaterstone Financial Inc. Executive Compensation&quot,2016).Therefore,the compensation metrics of the organization can be deemed valid andappropriate. However, it is essential to note that if WaterstoneFinancial, Inc. was a publicly traded company, compensation of theexecutive would be independent of performance. Most of the managersand CEOs on average are paid like bureaucrats. It is no wonder thatmany of them behave like bureaucrats and not profit maximizingentrepreneurs. For every executive, the metrics are within grasp andadhere to the SMART approach (Specific, Measurable, Attainable,Relevant, and Time-bound). Thus, they are not kept in the dark andmaximize their tasks to attain particular goals.

Afew years ago, Waterstone Financial, Inc. was falling apart. Saleswere declining however, after putting everything in order, thebusiness took a turn around. Now the company is making huge profitsdue to the rising prices of shares and increased level of sales. Thesoaring of profit margins translates to better executivecompensation, which stood at $8,106,755 in 2015 compared to$2,760,734 in 2014 (&quotWSBFWaterstone Financial Inc. Executive Compensation&quot, 2016).Asa result, the CEO’s compensation jumped from $1,526,930 to$4,529,531 (196% rise), which is inversely proportional to thecompany’s profit margins (13.48%in 2015) (&quotWSBFKey Statistics | Waterstone Financial, Inc. Stock – Yahoo Finance&quot,2016).Therefore,it is wrong to point out that the Chief Executive Officer’scompensation was reasonable since financial statements of Waterstoneindicate otherwise. Waterstone Financial, Inc. transacts with relatedparties. In the business environment, enterprises may at times beeither forced to work together or exchange information with othersfor growth and development. Some of them include highly ratedinsurance companies and private wealth managing firms among others.It is easier for Waterstone Financial, Inc. to have parties sharingsimilar interests and goals. It results in the creation of asymbiotic relationship, whereby, one will need the other to grow andin return derive a financial gain. It is essential to maintain suchaffiliations because they help provide comprehensive financial adviceto consumers. Thus, the absence of related parties may make it hardfor the business to attain extra knowledge, get work done, and seekmonetary help.


WaterStoneBank, SSB. – Compensation Committee Charter.(2016). 16 September 2016, from

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WSBFKey Statistics | Waterstone Financial, Inc. Stock – Yahoo Finance.(2016). 16 September 2016, from