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Payout is worth 1.7 million customer credit cards (roughly)

Target Corp. (TGT) has been criticized at times for overpaying its executives.  But a recent payout that critics are dubbing a "golden parachute" offering is drawing particularly pointed rebukes.
 
I. Ain't Nothing More Important Than the Moola
 
Target has agreed to pay ex-CEO Gregg W. Steinhafel a cool parting gift, worth nearly sixteen million dollars.  Under the plan he'll receive $10M USD under the "officer deferred compensation" which the company froze back in 1996.  There are also the cash severance payments of $7.2M and an additional severance payout of Target stock worth approximately $4M USD.  In exchange, he'll agree to pay back $5.4M USD in retirement benefits.  Those plus and that minus add up to a net value of $15.9M USD, a pretty sweet retirement plan.
 
But that's not all.

Gregg Steinhafel
Target's credit card breach "earned" ex-CEO Gregg Steinhafel $28.8M USD in roundabout fashion.

The 35-year Target veteran will still reportedly receive an additional $12.9M USD -- his full pay for 2013, despite resigning on May 5.  To be fair, he's committed to serving as an advisor during the CEO search through Aug. 23.

In total between salary, severance, and the other line items, he stands to score $28.8M USD from Target before he leaves.

Golden parachute
Gregg Steinhafel stands to score $28.8M USD for being fired from Target.
[Image Source: Jason Mick/DailyTech LLC]

Under normal circumstances it would not be all that controversial for Target to offer such big payouts to a departing chief executive.  Shareholders typically grumble about such things, but in the case of a company as expensive as Target, it's somewhat of a fact of life.
 
II. Payout is Worth About 1.7 Million of His Customers' Stolen Cards
 
What makes the payments more controversial is that Mr. Steinhafel tendered his resignation in the wake of revelations that Target skimped on security and neglected warning signs, allowing hackers to make off with 70 million Americans' credit and debit card data.
 
Today those stolen cards are retailing at "fire sale" prices of between $8 USD and $26 USD.  So Mr. Steinhafel's parting gift would be about the equivalent of the cost of 1.7 million of his customers' stolen credit cards, which negligence under his leadership allowed to happen.

Money on top of credit cards
[Image Source: Alamy]

The company's proxy filing about Mr. Steinhafel reveals that he didn't quit or resign on his own will -- he was fired, as it lists the departure as:

an involuntary termination for reasons other than for cause.

It also admits that shareholders feel that Mr. Steinhafel did not perform well and was overpaid, writing:

[Shareholder sentiment was that] overall pay for our former CEO was too high given Target's performance relative to peers.

The ex-CEO's base pay was $1.5M USD per year, but since stepping into the role in 2008, he had consistently received large bonuses.  In 2012 he made $20.6M USD (a bonus of $19.1M USD).  This year, after the data breach, his bonus was trimmed back to "only" $11.4M USD, giving him his salary of $12.9M USD.

Target Neon Sign
Shareholders consistently felt Mr. Steinhafel was overpaid. [Image Source: Fox News]

That's the beauty of the corporate world.  You can post sluggish growth, skimp on accountability efforts, and then lose all your customers data.  And in the meantime you'll still get overpaid and get a parting gift that basically ensures you a comfortable retirement for the rest of your years.

Sources: Target [SEC filing], Daily Mail UK





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Pure BS
By Motoman on 5/20/2014 3:26:44 PM , Rating: 5
I saw on the news some college professor defending the practice of not only paying CEOs horrifically ridiculous amounts of money in salary and other benefits, but also the golden parachutes - saying that they enable the CEO to go ahead and try to do something disruptive, something risky, knowing that it won't personally ruin them if it fails.

Bullsh1t. In what possible universe is anyone but the CEO getting a benefit from removing risk from being the CEO? For what possible reason would a CEO focus primarily on making the best decisions possible when he's guaranteed to be made a multi-multi-millionaire either way?

It is 100% against the best interests of a company, and it's shareholders, to remove risk from the CEO position. That should be the *most* risky position in the entire company. Because missteps from that office affect everyone else in multiples...as opposed to the random sucker in a cube someplace who almost certainly only affects himself, or a very small group, when he f%cks something up.

The penalty for screwing up as a CEO should be massive.




RE: Pure BS
By JasonMick (blog) on 5/20/2014 3:51:45 PM , Rating: 5
quote:
It is 100% against the best interests of a company, and it's shareholders, to remove risk from the CEO position. That should be the *most* risky position in the entire company. Because missteps from that office affect everyone else in multiples...as opposed to the random sucker in a cube someplace who almost certainly only affects himself, or a very small group, when he f%cks something up.
Agree.

But don't you think this part of a broader trend as a society we're seeing in America today? We're so intent on coddling and mitigating risk for everyone from our kids to our employees that we're living our lives in fear.

We're not allowing our kids to play outside because they might get parasites or infections. So instead they're getting asthma.

We won't let the kids play with their friends down the street, because a "stranger" might kidnap, when in reality most kidnappings and other crimes against children occur via a family member or regular acquaintance.

We can't build nuclear plants, serve piping hot coffee, or in some cases even have a kiddie rec sports league because we're afraid someone will sue us.

Many give up our freedom of speech, our freedom of the press, our freedom to be secure from mass searches, our freedom to due process and a trial by a jury of our peers. Many are willing to meekingly submit to mass surveillance and a police state all to try to put a warm blanket on our national security fears.

If our children are being pushed and bullied and they deck the bully in the face, 30 or 40 years ago, their parents and teachers would be saying the bully got what was coming. Today the kid is suspended and their academic career is ruined for standing up for themselves.

I'm afraid we're raising a generation of spineless sheep. Our parents and grandfathers made mistakes and weren't perfect, but at the end of the day they accepted responsibility for their actions and lived confidently, without fear.

I'm not seeing that these days. More and more, humanity is evolving into a cowardly, cowering mass, that's exploited and victimized by its own paranoia.

Of the few who get it, a lot are taking advantage of the situation and exploiting the dumb masses as best they can, whether it's a golden parachute or "carbon credits".


RE: Pure BS
By retrospooty on 5/20/2014 3:57:37 PM , Rating: 4
"I'm afraid we're raising a generation of spineless sheep...... More and more, humanity is evolving into a cowardly, cowering mass, that's exploited and victimized by its own paranoia."

So true. It's crazy how "ninnyfied" our society has become. Anything that happens, the first reaction is to sit back, pull out the victim card and play the blame game to figure out who you are a victim of.


RE: Pure BS
By Spuke on 5/20/2014 4:05:18 PM , Rating: 3
Well said Jason! Well said!


RE: Pure BS
By Nutzo on 5/20/14, Rating: -1
RE: Pure BS
By TSS on 5/20/14, Rating: -1
RE: Pure BS
By djdjohnson on 5/21/2014 3:43:01 AM , Rating: 5
Your minimum wage information is very wrong...

Minimum wage from 1970 to 1974 was $1.60. Adjusted for inflation (we'll go with the earliest date to give you the benefit of the doubt) that would be $9.78 today.

Minimum wage was increased to $2.00 on May 1, 1974. In 2014 dollars that would be $9.62.

It was raised again to $2.10 on Jan 1, 1975... In 2014 dollars: $9.25.

Jan 1, 1976, $2.30... 2014 = $9.58.

Jan 1, 1978, $2.65... 2014 = $9.64.

Jan 1, 1979, $2.90... 2014 = $9.47.

None of those amounts are anywhere near $15.00. You've been given bad information.


RE: Pure BS
By BansheeX on 5/22/2014 7:54:44 PM , Rating: 2
I'm not a fan of minimum wage law and I also don't think Americans today are productive enough relative to national debt levels to support a price fixed wage of $20+.

However, I want to point out that you're not entirely correct with your numbers. Someone in, say, 1964 did make at least double what today's lowest worker makes. That's because we were still on a gold standard. $1 was a redeemable note for 1oz of silver. Dimes were 90% silver. So if you want a more accurate estimate of inflation, look at today's metal/oil prices, not the CPI which we all know is extremely understated bullcrap with exclusions and hedonic adjustments. Ever since Boskin, the CPI is basically a child grading his own paper.

An increasingly productive society with low debt experiences a natural rise in wages relative to expenses. That stopped happening when we dropped the gold standard and started borrowing short-term money hand over fist to finance federal expansion. The national debt is so enormous now that it affects interest rate policy. We can't even set interest rates above 0% anymore without collapsing certain sectors like housing and financials, not to mention the drain it would have on tax revenue when a large chunk of that 3 trillion has to go to foreign holders. Yet we know they can't be 0% forever. What will we do?


RE: Pure BS
By bigboxes on 5/20/2014 10:57:27 PM , Rating: 3
Sorry Jason. As much of what you say is true, correlation ? cause. You are straying off from the topic and in doing so give those in position of privilege a pass. Look at the breakdown of society. It's so permissive. I cannot be responsible for my actions! It's like blaming the wife for the beating. You made me do it! Or how about the defense of the PED baseball players. Everyone else is doing it!

Enough with the excuses. Wrong is wrong. You can't just blame this on the working class. Accountability starts at the top or it should.


RE: Pure BS
By retrospooty on 5/20/2014 4:01:23 PM , Rating: 2
"college professor defending the practice of not only paying CEOs horrifically ridiculous amounts of money in salary and other benefits, but also the golden parachutes - saying that they enable the CEO to go ahead and try to do something disruptive, something risky, knowing that it won't personally ruin them if it fails"

Totally agreed, but it a company is willing to take that bet, that is on the company to take. It's a free country. To me it just seems like bad business. If a CEO knew he could take a huge risk and have no personal consequences, like the worst that happens is I have to resign and take a 20+ million dollar payout, its a ticket for disaster... But still , its the companies choice to make.


RE: Pure BS
By GotThumbs on 5/20/14, Rating: 0
RE: Pure BS
By Motoman on 5/21/2014 10:17:29 AM , Rating: 2
...because then I'd be in *favor* of a golden parachute?

Anyway, I've been vastly closer than you'll ever be, as I have been only 2 steps removed from the CEO office at a company with ~$50M in revenue, and 1 step removed at a company with ~$10M in revenue.

And I own and run my own company now.


RE: Pure BS
By mutatio on 5/21/2014 1:41:48 AM , Rating: 2
Yeah, after reading it I thought, what would they give, if anything, to someone lower in the ranks that cost them? I imagine store managers are let go for sales or expenditures getting out of hand and this knucklehead gets a sayonara to financial Valhalla! Just awful.


RE: Pure BS
By Reclaimer77 on 5/21/14, Rating: 0
RE: Pure BS
By someguy123 on 5/22/2014 12:31:54 AM , Rating: 3
That can't be right. They reportedly profited 500m Q1.

So not only has profit taken a 16% drop (which was also down last quarter by a gigantic chunk thanks to the data breach), he also ate (or will eat) 6 percent of the profits with his parachute.

It's not a CEO's job to monitor computer systems, but it is his job to ensure that their earnings do not tumble 46% in one quarter regardless of the reason. Upper management tends to hold lackey supervisors to that standard and I would expect the CEO to have even MORE responsibility for fiscal failures.


RE: Pure BS
By Reclaimer77 on 5/22/14, Rating: 0
RE: Pure BS
By someguy123 on 5/23/2014 12:32:27 AM , Rating: 2
Revenue was up but margins are down. Revenue was pumped up due to their canadian expansion, which ended up costing them what would have been a billion in profits without the additional operation costs. The credit card problem was actually less costly than the canadian rollout, though possibly more damaging to their long term image.

I don't expect management to oversee every aspect perfectly, but in my experience corporations tend to hold middle management responsible for losses even if it's realistically out of their control. I think resigning without the parachute and without negligence fines would've been enough, but I'm assuming he has good lawyers who kept his parachute locked in.


RE: Pure BS
By inperfectdarkness on 5/22/2014 6:50:53 AM , Rating: 2
It's BS just based on the fact that foreign companies--who are doing VERY successful, mind you, are usually paying only a fraction of what US companies typically pay CEO's.

Incentive-based-pay works great in professional sports. I wish the corporate world and the political world would migrate to it as well. "Oh? The US budget is over by 40%? Well I guess you get a 40% pay reduction this year. Enjoy!"


golden circle jerk
By fortiori on 5/20/2014 4:02:35 PM , Rating: 5
The way it works is this:

Wages are determined by the board of directors which are typically staffed by CEOs from other companies. It's a giant circle jerk with the board increasing salaries in one company so the members can go back to their companies, point to the raise they just gave, and demand a higher salary. Which the board of course grants because they themselves are filled with CEOs who want the same.

The corporate controlled media then picks up the story and explains how valuable the CEOs are and how they are certainly worth the money because golly-gosh: if the CEOs weren't worth that much they wouldn't be PAID that much.

The game is rigged folks. The rich are just getting better at rigging it as time goes on.




Data breach?
By KurgSmash on 5/21/2014 12:59:14 PM , Rating: 2
Now we're holding CEOs responsible for (nearly random, almost act of God) data breaches?

Please. He is getting paid too much on its own, the data breach has nothing to do with anything unless you can point to some concrete decision that he made that led to it.

This is like saying we should impeach the President any time something goes wrong. It's ridiculous.

So yes, it's cronyism and there is no reason to pay him that much, but linking it to the breach is silly.




Why?
By dxf2891 on 5/22/2014 2:57:06 PM , Rating: 2
The introduction of the Chairman of the Board and the Chief Executive Office, in addition to the president of a company was the beginning of the ruinization of this nation. This all began with the "Greed is Good" mentality. Those at the top had thier salaries explode exponentially. The products and/or services did not increase in price, so the monies were taken away from the workers. Many workers were reclassified as "Salaried" thereby requiring increased hours and productivity without an increase in pay. More workers were laid off while their remaining counter parts were leaned on to "keep the trains moving." As profits began to increase, so did the salaries and perks of the upper 10% of the company while the common workers were derided for taking sick days and accrued vacation. I think the reverse of the minimum wage should be in effect. There should be a maximum wage which is tied on a sliding scale to the minimum wage of a company. If the senior officers in a company want to increase their earnings, benefits and perks, a total valuation should be administered and the same percentage should be applied to the work force. So, if a CEO starts at a salary of $100,000 but ends up with a $1 Million total, the workers should also receive a 900% increase as a bonus or time off or a combination there of.




Why?
By dxf2891 on 5/22/2014 2:58:00 PM , Rating: 2
The introduction of the Chairman of the Board and the Chief Executive Office, in addition to the president of a company was the beginning of the ruinization of this nation. This all began with the "Greed is Good" mentality. Those at the top had their salaries explode exponentially. The products and/or services did not increase in price, so the monies were taken away from the workers. Many workers were reclassified as "Salaried" thereby requiring increased hours and productivity without an increase in pay. More workers were laid off while their remaining counter parts were leaned on to "keep the trains moving." As profits began to increase, so did the salaries and perks of the upper 10% of the company while the common workers were derided for taking sick days and accrued vacation. I think the reverse of the minimum wage should be in effect. There should be a maximum wage which is tied on a sliding scale to the minimum wage of a company. If the senior officers in a company want to increase their earnings, benefits and perks, a total valuation should be administered and the same percentage should be applied to the work force. So, if a CEO starts at a salary of $100,000 but ends up with a $1 Million total, the workers should also receive a 900% increase as a bonus or time off or a combination there of.




Non-issue
By FITCamaro on 5/20/14, Rating: -1
RE: Non-issue
By FITCamaro on 5/20/2014 3:31:33 PM , Rating: 2
probably got*


RE: Non-issue
By JasonMick (blog) on 5/20/2014 3:56:30 PM , Rating: 1
quote:
While I'm not condoning what happened, the guy probably what was in his contract. It's not like he was directly responsible for the lax security measures.
And yet if something goes wrong in the country, the President gets blamed.

Face it, if you're a leader you accept great reward, but also great responsibility. Handing someone the perks of leadership without holding them responsible for what happens under their watch is lunacy.

As CEO of a company you're responsible for the entire company. You delegate that responsibility, but at the end of the day if your underlings screw up big, your neck SHOULD BE on the line.

As for the contract, did you miss the part about $10M+ of the payout was a bonus? He could maybeeee try to sue Target if the language says something about the size of the bonus being discretionary based on perfromance, but good luck with that. As for the severance, if they wanted, they could have terminated him with cause to avoid paying the severance package.


RE: Non-issue
By GotThumbs on 5/20/2014 5:55:29 PM , Rating: 1
Lets just focus on what Obama has said himself;

quote:
You can keep your plan"

quote:
You can keep your doctor"

quote:
a red line for us is we start seeing a whole bunch of chemical weapons moving around or being utilized.

quote:
not even a smidgen of corruption.
Regarding IRS targeting certain groups.

quote:
"The president has decided that to share in the sacrifice being made by public servants across the federal government that are affected by the sequester, he will contribute a portion of his salary back to the Treasury," a White House official said at the time.
His salary was not reduced one dollar.


RE: Non-issue
By FITCamaro on 5/21/14, Rating: -1
RE: Non-issue
By wempa on 5/21/2014 12:29:57 PM , Rating: 2
quote:
As for the contract, did you miss the part about $10M+ of the payout was a bonus? He could maybeeee try to sue Target if the language says something about the size of the bonus being discretionary based on perfromance, but good luck with that. As for the severance, if they wanted, they could have terminated him with cause to avoid paying the severance package.


All bonuses should be discretionary and performance based. Since this is the CEO, it should be directly tied to the company's performance. That is typically how it works for the non-management employees. In the past I've had a few years where I got no bonus or a greatly reduced bonus in cases where the company's performance was bad. I don't have a problem with CEOs collecting their salaries, but it's absurd that a CEO gets terminated under circumstances such as these and also collects a huge bonus. They shouldn't get rewarded for both success AND failure.


RE: Non-issue
By FITCamaro on 5/22/2014 9:04:28 AM , Rating: 2
What a bonus is based on is up to the company that gives it. You, nor the government, should have no say in it.

What you said makes sense. But we all know that what makes sense is not what always happens.


"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein













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