If anyone is wondering why the darling stock of Bill Ackman and Whitney Tilson, for whom every collapse of JCP is a buying gift from god, namely JCPenney, is plunging after hours, it is because the company's president, Michael Francis, hired October 4, 2011, has just quit. To wit: "J. C. Penney Company, Inc. ("jcpenney") (JCP) today announced that Michael Francis will be leaving the Company, effective today. Chief Executive Officer Ron Johnson will assume direct responsibility and oversight of the company's marketing and merchandising functions." And to think that just 9 months ago the company CEO Ron Johnson announced, that "I am thrilled to welcome Michael to our team... He is an extremely talented executive with the vision and courage to re-imagine the department store experience. His ability to innovate and deep understanding of the industry will be invaluable as we set out to transform J.C. Penney into America's favorite store." And while his ability to do anything else appears to have been a dud, his ability to read the fine print in his contract, especially where it talks about his perks, was second to none. Because despite leaving just 9 months after his hiring, Francis is entitled to collect a whopping $9 million in pro-rated signing bonus (alongside $100,000/month in salary): all in all - a tidy package of $10 million for shooting the breeze while observing a sinking retail ship. Not bad for a company whose stock has just plunged to September 2010 levels.
From the firm's proxy statement:
Michael R. Francis. Mr. Francis’s offer letter, dated October 3, 2011, provided for the following:
- Base salary of $1,200,000
- Participation in our Management Incentive Compensation Program, with a target bonus equal to 100% of base salary, with a maximum bonus equal to 200% of base salary (prorated for 2011)
- An inducement equity award of 1,000,000 RSUs granted on November 16, 2011
- One-third of the RSUs will vest on November 16, 2015, November 16, 2016 and November 16, 2017 as long as Mr. Francis remains continuously employed by us
- RSUs will pro rata vest if Mr. Francis is terminated by us without cause prior to vesting
- RSUs will fully vest if, within two years of a change in control, his employment is terminated other than for cause or if he terminates his employment for good reason
- A sign-on cash bonus of $12,000,000
- Mr. Francis must reimburse us for a prorated portion of the bonus if he voluntarily terminates his employment for any reason other than death or disability or if we terminate his employment for cause prior to October 4, 2012
- Participation in our 2011 Change in Control Plan
- Participation in certain perquisites and benefits as an executive officer of the Company
With such generous shareholders, is it any wonder the stock has collapsed on the news? That, and of course the stamp of disapproval that the now former President has given the firm.
Here is the stock probing fresh 52 week lows.