A year too late for Barnes & Noble

Today marks one year since Michael Huseby stepped down as CEO of Barnes & Noble. And while we don’t usually make note of this sort of thing, the anniversary happened to overlap nicely with the proxy statement that Barnes & Noble filed last Friday.

Because there, clear as day — otherwise known as footnote 6 (b) to the summary compensation table on pg. 35 — was a disclosure about Huseby’s $15.7 million in severance. The aforementioned footnote helpfully explained that because Huseby had resigned for “good reason” he “received severance payments and benefits”. Given that Huseby was only CEO for a year and a half, that seemed like an unusually generous package, even factoring in his $1.2 million base salary.

Even after taking a closer look at Huseby’s original employment agreement, we still can’t quite come up with how the company arrived at $15.7 million. Here’s the relevant part from Huseby’s 2014 employment agreement:

the Company shall pay you an amount equal to two times the sum of (i) your then Annual Base Salary, (ii) the average of the annual bonuses actually paid or payable to you with respect to the three completed fiscal years (beginning May 1, 2013) preceding the date of your termination of employment (or such lesser number of completed fiscal years beginning on May 1, 2013 and ending on the date of your termination of employment) and (iii) the aggregate annual dollar amount of the payments made or to be made to you or on your behalf for purposes of providing you with the benefits set forth in Sections 3.3, 3.6 and 3.7 above, less all applicable withholding and other applicable taxes and deductions

According to the proxy statement, Huseby’s bonuses in 2014 and 2015 were zero. In 2013, his bonus was $1.275 million, so the average works out to around $425K. The only way we get close to the $15.7 million is by adding in a discretionary stock award that was valued at $6.6 million in 2014, when the stock was trading much higher. (Update: when we posted details about Huseby’s severance for our Pro subscribers last Friday, we included this sentence, which we should have included in this post. “While the company had disclosed some details of Huseby’s severance in the 10-Q that it filed on Sept. 10, 2015, it never spelled out the total number.”

While the math is certainly a worthwhile exercise, we’re much more interested in the fact that Friday was the first time that the company disclosed this amount. Think about that for a second: it essentially took the company a year to disclose how much severance it paid to its former CEO, whom, we should also note, was named Executive Chairman of Barnes & Noble Education, as part of the spin-off.

Barnes & Noble Education has yet to file its proxy, so we don’t know what Huseby’s salary is there. But at the time of the spin-off, which took place on August 3, the company said that Huseby’s salary was set at “no less than $500K”.

We’ve yet to really dig in to the SEC’s recent 318-page “Disclosure Update and Simplification”. But we’re hoping that somewhere in those 318 pages, they address problems like this. It shouldn’t take a year for investors to learn that they paid millions in severance to their former CEO.