Editors note: After this post was published, a spokesman for Sears Holdings contacted footnoted and provided a statement, which we include in italics below. As a matter of course, we typically write from the filings and do not contact the company for a comment.
Last spring, Sears Holdings announced with much fanfare that it had lured Jeffrey Balagna away from Eli Lilly to replace its high-profile Chief Information Officer, Keith Sherwell.
But as with most press releases, the details behind Balagna’s hiring were MIA.
That changed on Monday when Sears filed its 10-K. Attached to the filing as Exhibit 10.31 was Balagna’s offer letter dated April 26, 2013. Why it took nearly a year for Sears to release the letter remains one of those great mysteries. Our best guess is that as the company was preparing its proxy statement (which was filed on Wednesday), the company’s lawyers realized that they had never disclosed the details of Balagna’s compensation. And, given how much they’re paying, it seems more than a minor oversight.
As the letter outlines, Balagna was offered a base salary of $750K, an $842,500 signing bonus, $1.5 million in restricted stock, another $1.2 million in long-term incentives, a $3,000 a month housing allowance, and an annual bonus of $600K. As the proxy notes, Balagna’s total compensation last year was $3.5 million. That compares with the $4.3 million that CEO Eddie Lampert made. But all of Lampert’s compensation was in stock. His actual salary was just $1 last year.
We have no idea how this compares to what Sherwell was making because despite his high-profile and talk of using big data tools like the open-source software Hadoop, Sherwell was never mentioned in the company’s SEC filings. We also don’t know how this compares to what Balagna was making at Eli Lilly since he wasn’t considered an executive officer there.
We should also note that Balagna is the company’s third CIO in the past four years. Needless to say, the severance details for both Sherwell and the person he replaced, Timothy Kasbe, were also MIA.
Now, the rules are pretty clear in that the company only has to disclose these details for its named executives. And since neither Kasbe or Sherwell appear to have made the cut, Sears was simply following the rules.
A Sears spokesman said, “Our disclosures concerning Mr. Balagna’s compensation package were timely. Pursuant to SEC rules, we determined that Mr. Balagna was a “named executive officer” based on his total compensation for fiscal year 2013, the year in which his employment with Sears Holdings commenced. As a result, our 2014 proxy statement filed on March 19, 2014 contained detailed information regarding Mr. Balagna’s compensation package and we filed his offer letter as an exhibit to our annual report on 10-K for fiscal year 2013. Prior to that time, Mr. Balagna was not a named executive officer (again, pursuant to SEC rules).”
Still, given the revolving door for the CIO job and the retailer’s ongoing struggles to re-invent itself, it would be nice to see more disclosure, not less.