Circuit City Stores announced sweeping incentive awards for top executives in an effort to stem a tide of departures at the struggling consumer-electronics retailer.
Each executive vice president will receive a $1 million cash retention award, while senior vice presidents will get $600,000. The awards will vest over a three-year period, with half vesting on January 1, 2009.
Four executive officers will receive the cash: executive vice president and CFO Bruce Besanko; George Clark, executive vice president of multi-channel sales; Reginald Hedgebeth, senior vice president and general counsel; and Eric Jonas, senior vice president of human resources. Chairman and CEO Philip Schoonover is not participating in the program.
Circuit City’s board also approved retention awards for each vice president and director-level employee.
“The purpose of the award is to ensure the stability of the company’s leadership team by providing an incentive for these individuals to remain with the company during the period that the award vests,” the company stated in a regulatory filing. “The company believes that the award is an important component of its compensation package at a time when the company is seeking to successfully execute its business strategy.”
In addition to the cash retention awards, Circuit City’s compensation and personnel committee approved long-term incentive awards to the Schoonover and all executive vice presidents and senior vice presidents under the company’s 2003 Stock Incentive Plan. To take effect January 1, these awards will be in the form of options to acquire shares of the company’s common stock that will vest equally over a three-year period.
The awards are valued at $2,925,000 for Schoonover, $775,000 for the executive vice presidents, $325,000 for senior vice presidents on the executive management team, including Hedgebeth and Jonas, and $300,000 for other senior vice presidents.
The right to receive the full value of the option is contingent on the officer’s continuous full-time employment with the company through each of the vesting dates.
Long-term incentive awards also will be given to each vice president, director, store director, and others in comparable positions.
The company would welcome a change in fortunes. Its market capitalization is only about $1.1 billion, about 5 percent that of its number-one rival, Best Buy, whose market cap is $21.5 billion. And Circuit City’s stock is off 70 percent from its 52-week high, compared to just a couple dollars down for Best Buy.
In November, the company announced that David Mathews, executive vice president of merchandising, services, and marketing, planned to leave after less than a year on the job to become president of Orchard Brands, a specialty retailer. That made him the third senior-level executive to leave in the past year, according to the Associated Press.
Earlier this year the company received a lot of flak when it fired many higher-earning store employees, and then later invited them to apply for their old jobs.