The big sacrifice at Penney’s…
Many people these days feel lucky if they still have a job and the check actually clears. You’d think that would be particularly true at retailers, which are really in the dumps. But that’s not the case at JC Penney (JCP) which earlier this week filed this 8K that has some of the most self-serving language we’ve come across recently. Penney’s board has decided to give Chairman and CEO Myron Ullman III a supplemental performance grant “to provide an incentive for performance during the current economic environment and to recognize Mr. Ullman’s willingness to continue his service to the Company” (we’ve added the emphasis here).
A quick skim of the agreement doesn’t seem all that offensive, though at $25 million, it’s quite an incentive for something that really should be considered doing your job. The shares — up to 500,000 — are subject to a sliding scale based on stock performance over the next three years. If the stock doesn’t increase by at least 11.3%, Ullman gets zippo. If the stock increases by at at least 29.1%, Ullman gets the 500,000 shares. The agreement also has some interesting new language about what happens under a change in control and it’s not immediately clear from the filing whether this just applies to this particular grant or is a bit more broadly defined.
Still, given this story in today’s WSJ, which says that Penney is planning “about 300 “doorbuster” discounts on various items, up 80% from last year, and will keep stores open to midnight, one hour later than on Black Friday” you have to wonder what that sales clerk stuck in the Penney’s at 11:15 pm at night thinks about Ullman’s incentive. Between this and the “mistake” at Kohl’s that we footnoted two weeks ago, this very bad shopping season isn’t looking too shabby for at least two retail CEOs.
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Posted in Tags: 8Ks, retailers, stock options |
 3 Comments » |
December 19th, 2008 at 12:42 pm
This agreement is very interesting. The 8-k is unclear about what performance is required. A plain reading suggests Ullman only needs the stock price to increase 11.3% over three years. However, it was intereting to me that the 8-k kept referencing “annual stockholder return.” The corresponding Form 4 reveals that the stock price must increase at least 11.3% per year. Yet, the performance is not measured each year so it is unclear how it will ultimately be measure (average increase or cumulative). Bottomline to get the 500,000 shares and over $20 million dollars in value the stock price only needs to go up to around $44 a share (note 52 week trading range = $13 to $51).
Also, I thought the more interesting termination provisions relate to retirement, death, and disability. He gets a pro rata portion of the award without a minimum amount period of employment (doesn’t really serve the purpose of locking him in if he can walk away anytime).
December 20th, 2008 at 5:50 pm
After a recession, doesn’t the average stock increase by 32% in the first year? 3 years seems like an easy estimate for a recession calendar. Should I read this as, “JCP only needs to lag the S&P500 by 10%”?
December 21st, 2008 at 8:22 am
Do Myron Ullman and the Penney Board of Directors have any sense of decency? Dump this stock before it is too late. Penney is just a few steps away from Bankruptcy.