J.C. Penney Company, Inc. (NYSE:JCP) reportedly paid a heavy price of $170 million to lure back former CEO Ron Johnson and install his top three executives.
Bloomberg indicated in a report today that this amount covered cash payments and restricted stock offerings given to the executives, and to then-outgoing CEO Mike Ullman, who returned to that post after Johnson was fired earlier this year.
J.C. Penney Johnson Tenure
J.C. Penney Company, Inc. (NYSE:JCP) spent tens of millions of dollars to lure executives away from Target Corporation (NYSE:TGT) and other companies for restructuring that eventually went nowhere. Bloomberg put a final price tag of $170 million for assembling the management team led by ousted J.C. Penny CEO Johnson.
Since Ron Johnson took the helm of the struggling retailer in 2011, shares of the company have fallen over 51 percent.
According to Bloomberg, Johnson’s roughly one-year tenure as CEO resulted in a 25 percent drop in sales, as well as a $985 million loss in 2012.
Quoting public findings, Bloomberg remarked upon his April 17 exit, that Chief Operating Officer Michael Kramer pocketed $2.1 million. Executives from across the retail industry including Apple Inc. (NASDAQ:AAPL) and Target Corporation (NYSE:TGT) were recruited by Johnson to revamp the department-store chain. J.C. Penney Company, Inc. (NYSE:JCP) spent a total of $236 million that included management transition costs.
J.C. Penny spent about $1 billion in the first quarter trying to implement Johnson’s plan and analysts said the retailer had become cash-strapped. However consumers didn’t buy into Johnson’s plan to re-invent J.C. Penny with a no-discount, no sales, no coupons strategy that would convert the retailer into a collection of shops within stores.
J.C. Penny lured Francis from Target and designated him president of the company’s marketing. It offered him $12 million in cash and $32 million in restricted stock in November 2011. Further, $4.3 million was offered to Francis as part of a termination agreement. Thus in about 8 months, Penny spent $16 million in cash on hiring and firing Francis.
Detailing cost involved on Johnson, Bloomberg indicated Johnson received $52.7 million in restricted stock in November 2011 and received a salary of $1 million a year. However Johnson didn’t sign a termination agreement which would have been voided as Johnson voluntarily resigned. According to J.C. Penney Company, Inc. (NYSE:JCP)’s proxy filing on April 2, Johnson will receive unpaid salary and vacation as well as the money in a company retirement account.