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| Bruce Karatz leaves KB Home  KB Home, one of America's premier homebuilders, announced the results of the company's options investigation and a series of changes in its executive leadership. The investigation has concluded that the company used incorrect measurement dates for financial reporting purposes for annual stock option grants during the period from 1998 to 2005. The company expects that the incremental non-cash compensation expense arising from these errors is not likely to exceed an aggregate of $50 million, spread over the vesting periods of the options in question. The errors may also require an increased tax provision.Bruce Karatz has retired as Chairman of the Board, Director and Chief Executive Officer, effective immediately. Mr. Karatz has served the KB Home for 34 years and had been the Company’s only chief executive officer during its existence as a public company. During the decade from 1995 to 2005, KB Home increased total revenue from approximately $1.4 billion to more than $9.4 billion annually, and the number of housing units produced by the company increased from 7,857 per year to 37,140 per year. Mr. Karatz has voluntarily agreed to pay the company the difference between the initial strike price and the closing price on the new measurement date for options he has exercised that were incorrectly priced. In addition, Mr. Karatz has agreed that each new strike price will be the closing price on the new measurement date. This is expected to involve an aggregate voluntary value transfer from Mr. Karatz to the company of approximately $13 million. The company and Mr. Karatz have not agreed upon the other terms of his departure from the company and have entered into an agreement under which both parties reserve all rights. The board has elected Jeffrey T. Mezger to succeed Mr. Karatz as President, Chief Executive Officer and a Director. The board has created the position of independent non-executive chairman of the KB Home Board and will conduct a search to fill this position. In the interim until this position is filled, the Board created the position of Lead Director and elected Kenneth M. Jastrow II, a director of KB Home since 2001 and Chairman and Chief Executive Officer of Temple-Inland Inc., to serve as Lead Director. The board also acted to create the positions of Chief Compliance Officer and Risk Assessment Officer. These officers will report within the management team and will also have reporting obligations to the Audit and Compliance Committee of the Board. KB Home will conduct a search to fill these positions. write your comments about the article :: © 2006 Construction News :: home page |