Friday, May 24, 2013

Would Ron Johnson have screwed up J. C. Penney for less?



I waited a decent interval before writing this, so I could do it without biting through my lower lip.

Maybe you've heard that J. C. Penney, iconic American retailer, isn't doing so well. Under Ron Johnson, a new CEO, the company's sales last year dropped 25%,  and sales were down double-digits in the first quarter of this year. The stock price dropped 50% since Johnson took over in late 2011. Johnson's new sales and marketing strategies bombed, spectacularly.

Johnson resigned a few weeks ago, after less than 18 months on the job. The three top execs that he recruited also went out the door.

The directors of J. C. Penney spent at least $170 million just to get Johnson and his marketing troika in the door. That doesn't count their salaries or good-bye parachutes. A recent story on Bloomberg.net tells it all, read it here.

Among other goodies, Johnson received $52.7 million in "restricted" J. C. Penney stock when he was hired in November 2011. All of those shares vested last year, so I guess it wasn't too restricted….


I won't even get into details about Johnson's salary and going-away doggy bag of money, or the tens of millions paid to the other gents.

Apologists for sky-high executive pay packages love to claim that they have to "pay the going rate for top talent." That might make some sense if they were actually getting top talent.

"This is a story of how just tossing money at management doesn't guarantee success," commented Steven Hall, an executive compensation consultant.

Amen, brother.


Would Ron Johnson have taken only $25 million in restricted stock? We'll never know.




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