Today’s the first day of work for Kenneth H. Hannah, the new Executive Vice President and CFO at J. C. Penney, Inc. (JCP). Although an 8-K filed May 3 noted that the giant retailer and Hannah “have not entered into an employment agreement,” the SEC filing disclosed the compensation arrangements given to Penney’s new executive, and they’re not too shabby.
Hannah is starting with a base salary of $850,000, on top of which he’ll have the opportunity to earn another $680,000 under the 2012 Management Incentive Compensation Program. The company is also going to give him $2.5 million worth of restricted stock units (RSUs), but he needs to stick with the job until the third anniversary of the grant in order for the RSUs to vest (the only stated exceptions are if the company terminates Hannah’s employment without cause or a change in control occurs). And J. C. Penney is shelling out more, just to lure Hannah away from MEMC Electronic Materials, Inc. (WFR), where he has worked since 2006, although he had been in his most recent post – as Executive Vice President and President—Solar Energy – only since January, 2012:
“In addition, Mr. Hannah will receive a one-time cash signing bonus of $2,000,000 in relinquishment of certain benefits and compensation provided by his previous employer and as an inducement to join the Company.”
Thus, if all goes well, Hannah is set to become a $6.03 million-dollar-man, just for taking the job, meeting the goals set for him, and hanging around for a few years.
Then again, that may not be a slam-dunk. Although J. C. Penney is more than 110 years old, the company seems to be going through an adolescent phase, trying to figure out “Who am I?” If you refer to the website, you learn that Penney:
“…is re-imagining every aspect of its business in order to reclaim its birthright and become America’s favorite store. The Company is transforming the way it does business and remaking the customer experience across its 1,100 jcpenney stores and on jcp.com. On every visit, customers will discover straightforward Fair and Square Pricing, month-long promotions that are in sync with the rhythm of their lives, exceptionally curated merchandise, artful presentation, and unmatched customer service.”
Maybe it’s just us, but the “Fair and Square” and other verbiage brought to mind a rush of Americana – Aaron Copland’s “Fanfare for the Common Man,” the image of “American Gothic,” and mega-malls across the nation (although, surprisingly, the shoppers’ Mecca in Bloomington, Minnesota, the Mall of America, apparently forgot to include a J. C. Penney store).
Contrast that, though, with the squabble that the company is having with Institutional Shareholder Services (ISS), according to this piece that Maxwell Murphy posted on a WSJ blog last week. Murphy reported that ISS complained about Penney’s choice of an “aspirational” peer group of companies with “much higher revenues,” selected in order to pay higher levels of compensation to its top executives. He included a link to this filing, which includes the company’s reply that (among other points) its chosen peer group “reflects the market within which we compete for talent.”
And at the same time, the company recently cut about 1,000 jobs, and (also according to Reuters) chose Hannah in part because his prior job gave him experience in simplifying an organization and reducing costs.
Straightforward Fair and Square? America’s favorite store? A competitor for world-class (translation: expensive) executive talent? A frugal, streamlined company? Maybe it’s possible for all that to co-exist in one company. We’ll be eager to see whether Hannah, relatively-new CEO Ron Johnson, and Penney’s other new executives can pull it off.