Amid Restatement, Diebold’s CFO Loses Bonuses

On the CFO's watch, the company "misapplied" GAAP and triggered a restatement related to revenue recognition.

Kevin Krakora, CFO of Diebold Inc., won’t be collecting the bonus compensation that he once expected. The finance chief, who is currently working on restating company results and revising its revenue recognition policy, did not receive his 2007 cash bonus. He will not earn stock awards under Diebold’s performance plan, or receive a merit-based salary increase due this year, either.

Diebold, which makes security systems and voting machines, made the decision about Krakora’s performance pay after a compensation committee meeting last week. At the same meeting, the committee also decided to hold back bonus compensation from David Bucci, senior vice president of the customer solutions group. Both executives’ areas of responsibilities included issues inherent in the company’s former revenue-recognition policy, according to company spokesman Mike Jacobsen.

In a regulatory filing on Tuesday, Diebold said the revoked compensation for both Krakora and Bucci was made “in light of and in connection with” Diebold’s pending restatements. The move affects the performance shares the executives were predicted to earn from an incentive plan covering the period between 2005 and 2007, as well as their 2007 discretionary cash bonus, and 2008 merit-based salary increase.

Since neither executive received any of the affected compensation, they do not have to return any money, Jacobsen told CFO.com. The company’s performance shares are evaluated on a retroactive, three-year basis to see if the stock price had reached a predetermined level.

Earlier this year, Diebold finished its review of its revenue-recognition policy following investigations by the Securities and Exchange Commission and the Department of Justice. The company decided that it would no longer use the “bill and hold” method of recognizing revenue, a process in which it recorded revenue before a product was delivered to a customer.

Instead, for orders which the company used the bill and hold method, Diebold will delay recognizing revenue until the customer physically takes the product or when a product has been installed. Diebold admitted that its previous method of revenue recognition was a “misapplication” of generally accepted accounting principles.

The company estimates these changes will result in a decrease of $190 million to previously reported revenue in years prior to 2006. The company has not yet filed its restated financial statements for 2003 through 2006, as well as the quarter ended March 31, 2007.

A seven-year veteran of Diebold, Krakora was the CFO during part of the time in question. He was promoted from corporate controller to finance chief in October 2005. In 2006, Krakora earned a $320,000 salary with an additional $381,635 in stock awards.

Discuss

Your email address will not be published. Required fields are marked *