Circuit City Ups Executive Perks, Again30 Jun, 2008 By: Erik Gruenwedel
Fiscally challenged Circuit City Stores Inc. June 30 said its shareholders and board had approved a revised incentive program whereby select senior executives would be eligible to receive cash awards equal to upwards of 200% their annual salary or no more than $3 million each.
In a regulatory filing, Richmond, Va.-based Circuit City said the incentives were aimed at attracting and retaining a “highly qualified” management team.
The retailer said the purpose of the incentive plan was to provide a performance-based cash incentive for key executives who were in a position to “contribute materially” to the success of the Circuit City and its subsidiaries.
Last December, the chain announced incentives that allowed executive and senior VPs to receive cash retention awards of $1 million and $600,000, respectively, if they remained with the company to 2011.
Citing the need to reduce operating costs and “take immediate action,” CEO Philip Schoonover, a year ago, attracted criticism when he announced the termination and rehiring at lower pay of almost 4,000 hourly store employees.
At the time, Danielle Fox with Merrill Lynch, wondered what the incentive was for hourly employees to perform and stay with Circuit City.
Schoonover is under mounting pressure from analysts and shareholders, including former Hollywood Video co-founder Mark Wattles, to resurrect revenue going forward or sell the company.
The retailer is reportedly mulling multiple third-party strategic offers, including a previously announced $1.35 billion bid from Blockbuster Inc.
Regardless, the No. 2 CE retailer, behind Best Buy Co., has seen a thinning of its senior management team.
In March, chief marketing officer Peter Weedfald and small stores president Steven Pappas left the company.
Circuit City reported first-quarter (ended May 31) losses of nearly $165 million, three times the loss ($55 million) it posted during the previous-year period. The chain has posted just one profitable quarter in the past fiscal year.
Edward Woo, media analyst with Wedbush Morgan Securities in Los Angeles, said with Circuit City losing money, offering increased stock options made fiscal sense. But, cash is king.
“How good [the incentive] is depends on the target levels, [which] usually are based on profitability,” Woo said.