This kind of stuff is getting more prevalent and is just plain sick how American companies are treating employees. I cannot believe that unions cannot get stronger. Actually, we need a national type of union where it would have considerable more leverage than the many small unions we have now. Is anyone else getting pissed off besides me on this kind of crap.
------------------------------------------------------------------
NEW YORK — Even as Circuit City Stores (CC) pushed 3,400 purportedly overpaid employees out the door, the company went out of its way to make the departure of its outgoing chief financial officer a lot more pleasant.
What Circuit City did for Michael Foss last week says a lot about the haves-over-the-have-nots way executive compensation works.
By leaving, Foss would have abandoned thousands of unvested stock options. But Circuit City revised the terms of many of those options to make sure he could still exercise them after leaving the company — a move that would mean a profit of nearly $250,000 for Foss if he were to cash them in today.
Meanwhile, the employees laid off in March — because their pay was "well above the market-based salary range for their role" — are getting an average severance of maybe a few thousand dollars each.
So Circuit City complains that its workers are being paid too much, and then goes out of its way to make sure a departing executive gets every dollar coming to him and then some. You don't have to be an avowed enemy of high executive pay to see this juxtaposition as a little unseemly.
FIND MORE STORIES IN: CFO | Circuit City | Circuit City Stores | Bill Cimino
"The hypocrisy of it is just ridiculous," said Peter Cohan, president of Peter S. Cohan & Associates, a management consulting and venture capital firm, who also teaches management at Babson College. "I'm questioning the savvy of the management of the company."
Bill Cimino, a Circuit City spokesman, said the comparison of what the company did for Foss compared with its treatment of the 3,400 employees is "apples and oranges." He said the revisions simply give Foss what he'd be entitled to anyway if he stayed at Circuit City another few months. They're also meant as compensation for Foss' agreement to work with the company after his official departure date to aid the transition to a new CFO and help prepare the company's annual report and proxy statement.
Through Cimino, Foss declined to comment. He is leaving the company to become CFO of Petco Animal Supplies, which was bought out by private equity firms in October.
Because of his departure, he is forfeiting 100,000 options. But last week, Circuit City said in a Securities and Exchange Commission filing that it was accelerating the vesting of Foss' options on another 65,000 or so shares that weren't slated to vest until June through September and which would have been canceled following his resignation.
In addition, Circuit City gave Foss from July 1 until Dec. 31 to exercise his options, including 104,000 that had already vested. Otherwise, he would have had only 60 days after resigning to exercise them.
The moves could be lucrative. All the options are in the money, and some have exercise prices as low as $6.81 a share, compared with the company's Tuesday closing stock price of $18.61. If Foss exercised the accelerated options now and sold the resulting shares, he could make a profit of $236,081. If he did the same for the already vested options, he could make another $616,231.
Now, it's certainly not unheard of for companies to accelerate the vesting of options for departing executives. And it isn't as if the company is taking money away from the 3,400 laid-off workers to compensate Foss. Whatever profits he realizes are going to come from how Circuit City stock performs and not out of the company's pocket.
Still, the comparison is jarring. Foss earned $1 million in salary and bonus in the fiscal year that ended in February 2006, the last year for which figures are available, and now stands to make hundreds of thousands of dollars more. The 3,400 laid-off workers, who make maybe $30,000 or $40,000 a year, are sharing a $9.9 million severance pool, which averages out to $2,912 a person.
The average is actually less than that, Cimino because since workers affected by other Circuit City restructuring moves like outsourcing are also sharing that pie. (The company is trying to cut costs because its results have suffered from an electronics price war.)
The disparity could worsen morale further among Circuit City's employees, already upset about the firings, and prompt even more experienced salespeople to leave, Cohan said. "I guess basically (management's) not too sensitive as to how it's perceived in the public."
Philip Schoonover, Circuit City's chief executive, acknowledged in a recent conference call that the layoffs were "difficult and painful to the people who were impacted" and required "some tough judgment calls." But the changes were necessary, he said, because the company was "not competitive."
That may be. But thus far, it appears that sacrifice and "tough judgment calls" apply only to the rank and file, and don't extend to the executive suite.
http://www.usatoday.com/money/industries/retail/2007-04-26-circuit-city-cfo_N.htm
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
