Circuit City Giving Its Leaders Big Retention Awards
Friday, December 21, 2007
RICHMOND -- Circuit City, the nation's No. 2 electronics retailer, approved millions of dollars in cash incentives to retain its top talent following the departure of several key executives over the past year.
Executive vice presidents could claim retention awards of $1 million each, and senior vice presidents could get $600,000, provided they stay with the company until 2011, according to a filing late Wednesday with the Securities and Exchange Commission.
"The purpose of the award is to ensure the stability of the company's leadership team," the company said.
Circuit City is facing declining sales, due in part to stiff competition from Best Buy and discounters such as Wal-Mart. It has been attempting a turnaround and in March dismissed 3,400 store employees it said were too highly paid so it could replace them with new workers who would accept lower pay.
In November, David L. Mathews, executive vice president of merchandising, services and marketing, said he would leave after less than a year in that post to become president of specialty retailer Orchard Brands. Mathews was the third senior-level executive to leave in the past year.
In October, the company said it was testing new stores called The City, with a new look and different fixtures, lighting and product selection. The new format is being used in two stores and is expected to expand to 20 by the end of the fiscal year in February.
Those eligible for the incentive awards at Circuit City include Bruce H. Besanko, executive vice president and chief financial officer; George D. Clark Jr., executive vice president of multichannel sales; Reginald D. Hedgebeth, general counsel; and Eric A. Jonas Jr., senior vice president of human resources, the filing said.
The awards are effective as of Jan. 1. Awards also were approved for employees at the vice president, director and store director levels.
If executives stay until Jan. 1, 2009, they would get 50 percent of the cash bonus, an additional 33 percent the following year and the remaining 17 percent in the final year.
Chairman and chief executive Philip J. Schoonover, who is not participating in the retention plan, would be eligible for a stock award valued at more than $2.9 million if he stays with the company until January 2011, the company said.
Circuit City, which plans to report third-quarter results today, said in September that it lost $62.8 million in its second quarter on lower overall sales and continued restructuring activity, compared with a $10 million profit in the corresponding period a year earlier. Consumer electronics shares fell this week after Best Buy implied its fourth-quarter earnings would be below Wall Street expectations.