Best Buy In Financial Free Fall
Here are the numbers that’ll make you gulp -
- The Company’s share price dropped to a nine-year low of $16.25 before closing Tuesday at $17.91
- The stock shed 10 percent of its value an Monday when a new CEO hire, with no retail experience, was announced
- 2Q profits fell 90.6 percent YOY
- Same store sales are down 3.2 percent
If you’re a shareholder…don’t worry. Best Buy has just hired a new CEO. He’s never worked in retail but the board must like him a lot. To entice Hubert Joly to oversee the ongoing decline the board gave Joly a $20 million dollar signing bonus, plus a $3 million dollar stock grant (that’s already declined in value) on top of his $1.175 million base salary. I won’t go into the bonus plan and long-term incentives…as it’ll make you cry. Here’s the one that is a little eye-popping. Joly is a French citizen. If he’s unable to get a work authorization in the US that would prevent him from working at Best Buy (are you ready?) he gets $6.25 million for his inconvenience. Holy guacamole!
Whatever happened to CEO’s like Lee Iacocca, the CEO of Chrysler Motors, who worked for $1 a year during the bankrupt auto makers turnaround? Or Steve Jobs who worked for free when he was rehired to rescue Apple? Both were rewarded richly on the back-end – which makes sense given that both were extremely successful in righting failing businesses. Neither received a signing bonus. They had skin in the game.
Somehow a $20 million dollar signing bonus doesn’t sit well. Shareholders have good reason to be displeased. Give the guy $50 million if Best Buy is still around for holiday 2013 – that makes sense. Give him $20 mil to get on board is wrong.
Former chairman and founder Richard Schulze, who owns 21 percent of the company, is attempting to take over Best Buy. At the rate the stock is declining the board’s stalling tactic might allow Schulze to finance his buyout with a couple of credit cards.