Sometimes the CEO pay system actually works

OlympiaFebruary 7, 2014 

I’d be the last to try to defend exorbitant corporate executive pay packages, but I dislike misinformed claims such as that of Don Aye (Olympian, Jan 27) even more. Aye asserts that Ron Johnson, CEO of JC Penney, is receiving a $50 million bonus as he lays off 2,000 people.

After checking, I found that a Motley Fool contributor summed it up best: “J.C. Penney has paid Ron Johnson approximately $2.5 million in cash and other compensation, and granted him 1.66 million shares of stock, which would be worth approximately $25.7 million based on the stock’s recent trading price. However, all of this compensation is worth much less than the $50 million Johnson paid to J.C. Penney back in 2011 to acquire his warrants. Unless J.C. Penney makes a big comeback in the next five years, Ron Johnson will have actually paid for the privilege to work there.”

The irony is that, in some sense, his pay structure demonstrates that the system can work without drastic government intervention, at least occasionally. Who knew?

The Olympian is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service