It’s Obscene
Darrell Webb, 48 years old, will begin his new job on July 24 as the CEO of JoAnn Fabrics. JoAnn's has been struggling for years and appears to be continually changing their focus in terms of product and target customer. Darrell is supposed to change all that. His starting salary? $750,000.
Let's just get real. He is going to get that salary whether he performs or not. Sure, he has cash bonuses that will tie into the success of the company, but come on – do you really think not receiving additional bonus dollars will be a hard ship on his family?
How many people in the United States would be happy to work for a 10th of that salary?
If he was dedicated to the turn around of this highly important business (at least its success is important to my daughter and I who live for craft Saturdays), why wouldn't he show a sign of faith and take a more reasonable salary with the heft of his income coming in his results?
Worse yet, I am sure – although to be honest I am speculating – that he negotiated a beautiful exit package in case it doesn't work out.
I know that CEO's obscene salaries have been in the news of late and so perhaps this is old news to you. But as an Ohio resident and frequent customer of JoAnns- I am outraged.
What do you think. Should the salary of a CEO coming in to turn around the company be based on their results or should they receive a large base regardless?
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By RobertinSeattle, July 8, 2006 @ 4:12 pm
Well, as a lifelong founder and CEO of many companies, I can tell you that there are many facets missing from this story. First and foremost is how much trouble JoAnn’s is really in. So their Board is faced first with finding someone highly qualified who will even consider taking this tough job. So when you say a lot of people will be glad to take the job for 1/10th that salary, I’d agree with you. That is, if you want any old idiot to come along and take the job and then proceed to run the Company into the ground overnight. Secondly, the Company’s not exactly in a strong position to make a lot of demands if they find someone they believe to be competent for the job. Let’s face it: If you find an A-List executive to take the task, they’ll certainly want a 7- if not 8-figure salary. It’s not just their name and reputation they’re bringing to the game but also their experience. If you think a $750,000 salary is obscene, you must love professional athletes. Personally, I think baseball and basketball salaries are truly obscene.
Here’s a fair argument from Webb to the Board(IMHO): “You’re coming to me and wanting me to turn your floundering Company around. I already know you’ve played the field and been turned down by a lot of other CEOs. If I do a great job of turning things around, I SHOULD be well-rewarded for using my time and skills to do it. If things fail, I may be partially responsible for it but some of the blame will also lay with the Company and its Board for having such poor oversight to have gotten it into this weak position. And I won’t be able to tell completely until I’ve had a real chance to come in and evaluate the situation on the ground. You know my background and that is why you’ve come to me. So what are you going to offer me that will entice me sufficiently to turn down other offers?”
That’s reality. If I were a Director, I’d sure look twice at some unknown coming in to do a massive turnaround for $75,000 a year. The old axiom “You get what you pay for.” still holds true these days.
Look, you’ve got a Company that’s projecting $1.8 BILLION (yes, that’s a ‘B’) in sales for fiscal 2006 with projected net loss of $23 million. Even with a 5% net profit, they should be earning $90 million a year. If Webb succeeds in doing this, they’ll be paying him a miserly salary of LESS than 1% of earnings (plus bonuses, of course).
So I think calling Webb’s salary of $750,000 obscene is, well… obscene.
By Deborah, July 8, 2006 @ 5:07 pm
Robert,
Thanks so much for your comments. Prior to starting my own company I worked for Cole National. While I was there, a new President and CEO was brought in to turn around the company. Cole had purchased a successful brand, Pearle Vision, and subsequently watched as this wonderful brand began to lose its identity.
Larry Pollock, a well known executive who had worked in a number of industries with a successful track record, was hired at a starting salary of less than $100,000 per year. His primary compensation was based on the company results.
The company did turn around and eventually was sold to Luxottica for a lot of money. Larry did very well and so did the company.
I realize every situation has a “behind the scenes” story of which few know.
However, on the surface, it seemed like a lot of money. Thanks for your clarification.
By Anita Campbell, July 9, 2006 @ 8:01 am
I agree that CEO pay has gotten obscene.
What is even worse is to realize that the CEO is only person. It borders on ludicrous to think that one person can turn around a company. What hubris!
By belulah, January 18, 2007 @ 4:43 am
As a former employee, it is ludicrous to know he makes that much when they don’t pay their staff very well and won’t give the needed hours to run the stores. Sometimes it is only 4 people a day. Typical weekly hours are 245 or less. How do you run a store on that when you are open 80hrs a week and have to have 2 people in the store at all times? Answer you run your store manager into as many hours as needed and burn them out. They really need to look at putting more hours into the stores and paying their people better. This would go a long way in helping their bottom line. You have to spend it to make it