Denny's CEO questions settlement

By Dick Hughes  

AUGUST 10, 2010 11:26 a.m. (0)

Nelson Marchioli, who lost his job as chief executive officer of Denny’s Corp. under unexplained circumstances, has asked for arbitration “with respect to the settlement of any outstanding obligations related to his departure.”

In a filing with the Securities and Exchange Commission, the company said it could be responsible for a severance payment to Marchioli of anywhere from $800,000 to $3.2 million.

Without explaining the circumstances, the Spartanburg restaurant chain announced on June 8 that Debra Smithart-Oglesby, chairman of the board, had been appointed interim CEO succeeding Marchioli, effective that date.

All Denny’s has said publicly or in regulatory filings is that Marchioli, who was CEO for 10 years and whose performance was praised by the company in a proxy fight over his board seat, had departed.  Nor has Marchioli commented publicly.

His departure came less than three weeks after his contract apparently renewed for another year under his employment agreement with the company.  Marchioli’s job as CEO contractually was to be renewed on May 20 unless the company notified him 90 days in advance of that date of intent not to renew.

According to the company’s 2010 proxy statement to shareholders, Marchioli was entitled to an estimated cash severance payment of $3.1 million within five days after termination without cause. That is the high end of the estimate Denny’s said is at risk in an arbitration proceedings.

There has been no declaration by the company that Marchioli was dismissed for cause.  In fact, the company praised his performance, as well as that of the board and management, in fighting off a proxy fight to unseat Marchioli, Smithart-Oglesby and Robert Marks.  All three were re-elected.

Marchioli later, on July 9, also was forced off the board. He did not go voluntarily.

In replacing him as a director, the company said Marchioli was disqualified from serving under a bylaw provision that “triggers an obligation to submit a resignation” if there was a change in his employment responsibilities.

Marchioli was replaced by Gregg R. Dedrick, 51, of Whole Strategies, a consulting firm. He had prior experience with KFC, Yum Brands and Pizza Hutt.

In 2009, Marchioli received $2.1 million in total compensation.

Since his departure from the company, he has sold 261,775 Denny’s shares with a yield of $737,687, according to EDGAR Online Inc.’s account of insider transactions.  He still held 3 million shares as of the end of June.

The company said the arbitration proceeding with Marchioli will be before a single arbitrator in Charlotte, N.C., under rules of the American Arbitration Association.