Target Hands $28.8M Golden Parachute to Fired CEO, Despite Data Breach
May 20, 2014 2:56 PM
Payout is worth 1.7 million customer credit cards (roughly)
Target Corp. (
) 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
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.
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.
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
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.
[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.
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.
Target [SEC filing]
Daily Mail UK
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