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Failure Continues to Reward

17 Oct, 2008 By: Erik Gruenwedel

Demonizing corporate greed during the worst economic meltdown since the Great Depression has become almost too easy with no shortage of public enemies to assail.

Apparently, Trans World Entertainment — parent of the f.y.e., Suncoast and Second Spin stores — wants in on the abuse.

Last week, the compensation committee of the Albany, N.Y.-based packaged media retailer’s board said it approved incentives to three executives in the form of restricted stock and deferred cash payments totaling $900,000.

The perks to Jim Litwak, president and COO; Bruce Eisenberg, EVP, real estate; and John Sullivan, EVP and CFO, include individual payments of $150,000, payable Nov. 3, 2009, and successive $75,000 payments payable Nov. 3, 2010 and 2011, respectively.

They hardly need the money as Litwak’s 2007 compensation (including stock options) totaled $831,737; Eisenberg tipped the pay scale at $452,278; and Sullivan earned $514,770.

The company said the additional monies are part of a long-term incentive plan originated in 2005 — incidently, the last time Trans World turned a profit. Corporate "wisdom" says that without incentives companies would find it difficult to recruit and retain qualified senior executives. Apparently, a multiple six-figure salary isn't what it used to be. 

Why should you care? Because it is precisely this sense of entitlement among many public companies that contributed to the stock market mess. Corporate denizens beholden with the fiduciary duty to maximize shareholder value, instead enrich themselves while their companies' fortunes freefall.  

In a 2007 financial call, several investors decried the millions in compensation and related perks (use of corporate jet) awarded founder/CEO Robert Higgins, his executive team and board members.

“It does seem out of whack for a company that has had negative to flat [same-store] comps for six plus years to have a corporate jet,” said one investor.

Obviously, management is out of whack and investors have pulled the plug with shares down near historic lows. Maybe, it’s time to put the plane on eBay.


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