What factors probably led to this pay package?
CASE: Best Buy Pays Big Bucks for CEO
Best Buy, the Richfield, Minnesota retailer awarded its new CEO, Hubert Joly, a pay package valued at as much as $32 million for three years. The slumping consumer-electronics chain with 1,400 stores had been without a permanent CEO for about five months.
Mr. Joly, who is a native of France, will be paid $6.25 million if he is unable to get a visa to work in the United States. The deal further calls for Mr. Joly to get a base salary of $1.175 million for the coming years, but guarantees him an annual long-term cash award of no less than $8.75 million for the same period. Mr. Joly insisted on payments to make up for the compensation he leaves behind as he leaves his job as CEO of the hospitality chain Carlson Companies.
Best Buy defended the arrangement saying that it had to compensate Mr. Joly for the money he left behind at Carlson, but that most of future pay is tied to incentives based on his performance for the company. According to one spokesman, the cash compensation is in the middle range of executive compensation for a company the size of Best Buy.
The founder and leading shareholder of Best Buy, Richard Schulze, has announced his intent to try to take the company private after the latest quarterly earnings fell 91%. That may require a proxy fight, although Mr. Schulze remains open to discussion. Best Buy has struggled to make changes in its business to deal with the growth of online retailers such as Amazon.com Inc.
Mr. Joly has a record of stabilizing troubled companies, but he has not previously worked before in retailing. His pay package of $32 million is primarily made up of $20 million in signing bonuses. A person familiar with the situation said, “He is a sitting CEO doing well.” Another observer declared, “All he has to do is show up for three years to get most of it.” “As a shareholder you would like to see more strings attached.”
What factors probably led to this pay package?
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