Times are tough in retail right now, but there’s still good money to be had for big-time executives, even when they are severely underemployed.
As rumors fly that beleaguered Macy’s Inc. could be scooped up by Richard Baker’s Hudson’s Bay Co., Cowen & Co. analysts pointed out that a deal could be helped along by “substantial golden parachutes” totaling $122.3 million and designed to ease the fall of department store’s leaders in the event of a takeover.
Should Macy’s actually cut a deal, chairman and chief executive officer, Terry J. Lundgren, who will become executive chairman shortly, could have a more than $80 million payment coming his way, and his replacement as ceo, Jeffrey Gennette, will also be getting more than $12 million.
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Meanwhile, chief financial officer, Karen Hoguet, and chief stores officer, Jeffrey Kantor, should both be seeing payouts of about $15 million with any buyout or merger.
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These numbers might seem excessive, but Les Berglass, founder and ceo of executive placement firm Berglass Associates, said while “incredibly expensive,” big walkaway payments for executives are just part of the corporate landscape.
Companies bringing in outside talent often have to compensate executives for the huge packages including cash and stock that they leave behind as they walk away from their prior job. Retailers are literally placing big bets that new executives will increase the company’s overall value.
“While it’s understandable for shareholders to be upset when having to pay large severance packages, that’s just the tip of the iceberg,” Berglass said.
To him, the focus should be on how to avoid bringing in “the wrong ceo.”
Ill-fitting chiefs can make for potentially jarring changes in the corporate hierarchy and big payouts.
Stefan Larsson, who is headed for exit after just 14 months as ceo of Ralph Lauren Corp., might have disagreed with the company’s namesake on “how to evolve the creative and consumer-facing parts of the business,” but he’s leaving with a non-compete agreement and a handsome package — $10 million over two years, according to Cowen.
Larsson will not be alone in being well off as he takes some down time.
When Federica Marchionni left Lands’ End after just 19 months as ceo, she walked away with about $4.7 million.
Much of that came in the form of Lands’ End stock, but the one-time president of Dolce & Gabbana USA will also be getting her full $950,000 base salary and benefits for two years while she waits out her non-competition agreement.
(A string of other recent ceo exits, including Michele Sodi from Versace USA, Sarah Crook from Christopher Kane and Stéphane Maquaire from Vivarte, among others, likely include many millions more in “walkaway” compensation.)
Although Berglass acknowledged these payouts can appear obscene to the average non-executive, but the amounts are in line with industry standards.
The real problem, he said, lies with company board members, who are bringing in top talent that may not make sense for a given brand, especially when that brand is looking for a turnaround.
“The shareholder’s focus shouldn’t be on how large a severance package someone receives,” Berglass said. “Focus should be on selecting contemporary board members who can vet talent that will succeed in today’s complex retail environment.”
But board members, too, seem to be making out pretty out pretty good.
With a Thursday IPO, Snapchat’s Snap Inc. gave a peek at what board members, who generally have other very lucrative full-time gigs board member, are being paid. Joanna Coles, chief content officer of Hearst Magazines, was paid $110,866 from Snap last year.
And A.G. Lafley, ceo of Procter & Gamble Co., received $2.6 million in compensation from Snap. Lafley’s take included stock awards valued at $2.5 million and other compensation of $83,333. He joined the company’s board in July and also receives a $200,000 annual cash retainer to cover the costs of his travel to the company’s meetings and events.
Good work if you can get it.