NEW YORK, N.Y. – The CEO of Best Buy, turnaround expert Hubert Joly, earned compensation worth $19.6 million in his five months on the job in 2012.
The year saw the company through three CEOs, and Chairman Harim Tyabji called it a “tumultuous” period in a Tuesday filing with the Securities and Exchange Commission.
Joly stepped into the role in September. Former CEO Brian Dunn exited abruptly in April when a board investigation found that Dunn violated company policy by having a “close personal relationship” with a female staffer. Board member Mike Mikan was interim CEO before Joly was hired.
The CEO turnover came as Best Buy worked to improve its results. The Minneapolis company faces tough competition from online retailers and discounters. It has cut jobs, invested in training employees and started matching online prices.
Joly, 53, received a base salary of about $490,000 and a $3.5 million bonus for the year ended Feb. 2, 2013. The bulk of his pay came from stock and option awards valued at $15.6 million on the date that they were granted.
Dunn was only on the job for about two months of the fiscal year. His compensation dropped 55 per cent to $3.7 million. That’s included in the total $6.6 million in severance, which was disclosed in April.
The large severance package displeased shareholders, who voted “No” on a non-binding “Say on Pay” vote, which lets shareholders register approval or disapproval on executive pay.
Tyabji said the company recognizes that many shareholders felt like Dunn received more than he was entitled to and the package didn’t accurately reflect his business performance during the year. Tyabji said the board heard the concerns and will take them into account when determining pay packages for executives in the future.
After Dunn left, board member Mike Mikan served as interim CEO, but Tyabji said his ability to recruit and retain at the senior level was “extremely limited” and the company faced losing key executives. To keep the executives, Best Buy gave some of them cash and stock grants to keep them on board until a permanent CEO could be found.
Mikan received total compensation of $3.3 million, including a base salary of $1.3 million and stock awards worth nearly $2 million on the date they were granted.
In the fiscal year ended Feb. 2, Best Buy’s loss narrowed to $249 million from $1.32 billion the year before. Revenue edged down less than 1 per cent, to $49.62 billion. Its share price fell 30 per cent during that time.
The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest that the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive’s stock and option awards for 2012 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company’s stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.