I guess we finally found out where the money Circuit City (CC) saved by "letting go" its highest paid and most experienced sales people earlier in the year is going, to the folks who made the ill-fated decision.
In an SEC filing, CC said the company's board approved "retention awards" of $1 million for executive vice presidents and $600,000 for senior vice presidents. The awards will be effective as of January 1, 2008, and vest over a three-year period. Circuit City said the awards were intended "to ensure the stability of the company's leadership team by providing an incentive" for the officers to stay.
Included in the payouts are Bruce H. Besanko, chief financial officer; George D. Clark Jr., executive vice president for multi-channel sales; and general counsel Reginald D. Hedgebeth.
CEO Philip Schoonover will not be participating in the retention plan, but would be able to receive long-term incentive awards under a 2003 stock incentive plan. Based on both the company's and the stocks performance, Schoonover gets nothing and in all reality will be fired before next year is out anyway.
One would think shareholders would be outraged by this. They have watched this team lose almost 75% of the company's market cap this year as shares have fallen from $22 to $6. If we go back a another year, the losses jump to 80% from $30 a share.
I guess the questions is, why would shareholders want to retain these guys? By almost every metric, Circuit City is worse off. Since FY 2005 ended its cash position has steadily deteriorated (from $1 billion to $400 million), debt has almost tripled and market share has plummeted. They did manage to raise the dividend this year from 16 cents a share from 7 cents in 2005 but given the company's precarious financial situation, even that decision is questionable.
Both Best Buy (BBY), Wal-Mart (WMT) and Sears Holdings (SHLD) all have reported strong electronics sales this Christmas. If Circuit City does not do the same, there ought to be a shareholder revolt.
It just seems that every time we hear from Circuit City, they leave us scratching our heads. At least we are not shareholders, they are probably pounding their heads on a table.
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