Staples shareholders vote to cap golden parachutes
Following a shareholder vote in June, Framingham-based office supply retailer Staples Inc. announced this week it will limit severance packages for senior executives that leave the company.
The Staples move appears to be part of a larger trend toward reducing compensation for executives in order to curb turnover and make it less cushy in general for executives to exits companies. Other companies that have recently imposed limitations for their chief executives include drugstore operator Rite Aid and publisher Gannett Co.
In April, Forbes Magazine cited a study by consulting firm Challenger, Gray & Christmas that showed turnover accelerated nearly 16 percent between January 2013 and 2014. A report published by the same firm this summer indicated that turnover is now declining, though the reasons are not yet clear, according to John A. Challenger, CEO of Challenger, Gray & Christmas.
“It is difficult to pin the decline to an overriding trend, as there are so many factors that impact a CEO’s decision to leave his or her post. An improved and more stable economy is likely to be one factor helping stem the tide of CEO exits,” Challenger said in a statement.
If more companies seek to limit severance packages, commonly known as golden parachutes, it could help steady corporate leadership further.
In the case of Staples, the shareholder vote stipulates that the company will not pay severance benefits for existing or future employees that exceeds 2.99 times the sum of the executive’s base salary, plus target annual cash incentive awards, without seeking shareholder approval, according to company filing.
The policy applies to cash payments made in connection with a termination of employment, representing continued salary; bonuses based on amount earned or paid in prior years; payments in lieu of continued benefits, and payments to offset tax liability of the employee.
But the new policy does not apply to employment or severance agreements assumed by Staples in connection with the company’s proposed merger with Office Depot Inc. That deal is on hold after the Federal Trade Commission this week delayed a ruling on the merger until December.
Office Depot execs excluded
Office Depot CEO Roland Smith could receive close to $47 million in severance, according to news reports. His 2014 base salary was $1.4 million, according to Staples.
“Our board is committed to responding to shareholder feedback and ensuring that the company’s executive compensation program aligns with best practices,” said Paul Walsh, chair of the company’s Compensation Committee. “This new policy is in the best interests of Staples’ shareholders.”
Meanwhile, the $27 million severance package that outgoing EMC Corp. CEO Joseph Tucci is reportedly slated to receive when he finally retires, after years of mulling it. According to CNN Money, Tucci’s severance deal includes $7 million in cash, which is equal to trip his annual salary and bonus. The remainder comes from stock payments.
Tucci has said he will stay on the job until the company’s $67 billion sale to Dell is complete. That’s expected to happen within a year.
Image source: Freedigitalphotos.net
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