Rewarded for failure…

June 20, 2005

Mall clothing retailer Wet Seal (WTSLA) finally filed its proxy (as well as a second amended K) late Friday and one of the things that jumped out is how former Chairman and CEO Peter Whitford was rewarded despite nearly driving the company into the ground. Last August, the stock was trading under $1, though it has since recovered, in part, no doubt, due to Whitford’s resignation.

During Whitford’s brief tenure as CEO — he was named on June 30, 2003 and resigned 16 months later — Wet Seal’s stock fell by more than 80%. But the proxy shows that Whitford still managed to walk away with over $2 million in severance. And that doesn’t include the 500,000 options — 200,000 at $2 a share and 300,000 at $1.75 a share — that he has until June 2006 to exercise.

Based on Wet Seal’s current price of nearly $6 a share, that would add put another $2 million in Whitford’s wallet. Or, Whitford could wait and see if new CEO Joel Waller, who took over as CEO on Feb. 1, 2005, is able to continue growing shareholder value over the next year. It’s certainly a lot easier to sit back and watch a stock appreciate than actually dig in and actually work to make that happen.

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