Dave Brandon - Toys "R" Us Salary
Presented without comment.
Mr. Brandon’s Employment Agreement
In connection with Mr. Brandon’s appointment as Chief Executive Officer, the Company and Mr. Brandon have entered into an employment agreement with an initial term of five years, with automatic renewals for successive one-year periods unless either party delivers a timely notice of non-renewal. The agreement further provides for the following compensation and benefits:
Base Salary and Bonuses. An initial annual base salary of $3,750,000 per year, which may be increased at the discretion of the Company’s Board of Directors, and an annual bonus targeted at 120% of annual base salary (with a maximum possible bonus of 160% of annual base salary), subject to achievement of performance targets established by the mutual agreement of the Board of Directors and Mr. Brandon. Mr. Brandon’s annual bonus for the 2015 fiscal year, if any, will be pro-rated based on the number of days for which Mr. Brandon is employed by the Company in that fiscal year. In addition, the Company will pay Mr. Brandon a one-time bonus of $4,250,000, payable in a lump sum within ten days of June 1, 2015.
Perquisites. Mr. Brandon will be eligible for the Company’s welfare benefit plans and retirement plans, including the Company’s 401(k) and supplemental executive retirement plans and medical, dental and life insurance plans, as in effect from time to time on the same basis as other senior executives of the Company. In addition, the Company will also provide Mr. Brandon with the use of a Company-paid automobile (or alternative ground transportation) and the use of a private aircraft for Company business travel and specified personal travel (together with a tax gross-up for the income attributable to him for the use of the aircraft). The Company has also agreed to reimburse Mr. Brandon for specified legal fees as more fully described in Mr. Brandon’s employment agreement and to provide Mr. Brandon its relocation package available to other senior executives.
Long Term Incentive Awards. Mr. Brandon will also participate in the Company’s long-term cash incentive award program, which will provide him with a long term cash incentive award, effective July 1, 2015, under the Company’s 2010 Incentive Plan, of two payments of $18,750,000. The award will vest and become earned upon achievement in any fiscal year ending on or before the last day of the Company’s fiscal year ending January 2018, of a specified level of Adjusted EBITDA less average capital expenditures for the prior three fiscal years, as more fully described in Mr. Brandon’s incentive award agreement, subject, except as set forth below, to Mr. Brandon’s continued employment through the end of the fiscal year in which such condition is satisfied. If earned, the first payment under the award will be made shortly following certification of achievement and the second payment under the award will be made one year following certification of achievement.
http://www.sec.gov/Archives/edgar/data/1005414/000119312515213371/d9355…
http://www.sec.gov/Archives/edgar/data/1005414/000119312515213371/d9355…
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Proof that good things come to those who put themselves in the right position. He hired a crappy coach so he could meddle, jacked up prices on a lot of things, wrote email responses that offended people, and that's all I can remember. What a terrible guy.
Tied hand-in-hand with the proof that American big business is bad.
Like it or not, that is what major company CEO's make. I lag no one is disdaining Brandon, and I'd never hire him for anything, but I doubt Toys R Us checked fan blogs too closely before they hired him. And like it or not, his resume on its face is strong. There is not one single thing wrong with paying a CEO what CEO's at other public companies make, That's called a marketpace. Excatly like paying pro athletes 20 million a year, that's the going rate. And arguably (IMO inarguably) a CEO is far far more important than a football player, because he/she leads and is responsible for hundreds or thousands of people.
There were nice, prosperous days when CEOs averaged just a few multiples of their typical workers' pay. Now, it is many times that. The market can never be wrong, but it can be very stupid.
Your comment while being 100% correct, can also apply to Athletes and Entertainers. Is the market also stupid for them?
I think the point is generally that logically, you'd like to have your most incentivized positions to be the one's most beneficial to society at large: cancer researchers, educators, etc. The market is "stupid" because we say we value cancer research, but how we spend our money ("the market") shows we love sports far more
I understand the point you're trying to make, but charitable donations in 2013 were roughly twelve times the combined revenue of the NFL, MLB, NBA and NHL.
Those aren't exact collaries for cancer and sports, but sports are a tiny fraction of the economy in macro terms. The big four sports revenues totaled ~.18% of GDP in 2013.
Good point!
The average worker's impact on a company is negligible whereas a CEO's can be calamitious or terrific. If a company wants to pay a CEO that much money then it's their right and I can understand it.
If you have a rational reason why a CEO should not be paid millions by a company state it. But as of yet no one has uttered one single reason why otther than "It's stupid".
for a major company has skyrocketed as well.
I would never want to be a CFO after Sarbanes Oxley.
If liability is the main reason, wouldn't doctors be paid just as much as CEOs...?
To pay someone millions of dollars to run your company into the ground, such as what the "Frat Boys" did to K-Mart, is both illogical and stupid, CEO"s should be paid, like athletes and entertainers, by preformance. If a CEO does a great job, like a certain former CEO at Ford, he should be paid like a lotto winner, but if he does a shit job, like the "Frat Boys", then that person should be paid like an average worker and have his/her ass booted out the door, like Brandon was here.
How's that.
Now granted, the top end Fortune 500 CEO's make much more than that, but there are thousands of CEO's in this country.
I have no idea what your source is for this information, but Forbes has the average American CEO salary at 11.7 million as of 2014. Seems like you're a bit off.
http://www.forbes.com/sites/kathryndill/2014/04/15/report-ceos-earn-331…
Your link is an opinion article based upon an AFL-CIO report, which includes only the top 300 publicly traded companies. In other words, it ignores the hundreds and thousands of smaller companies with CEO's, as well as all private companies. So in other words, that data doesn't say what you think it says.
This link shows my memory was off--to the high side. Actually, according to the Bureau of Labor statistics, the average CEO salary is 178k.
http://www.bls.gov/news.release/pdf/ocwage.pdf
It's a cartel of privliged buddies overpaying each other - on all of our dime.
How it is on "our dime" when these companies are funded by stockholders. It isn't "your dime" unless you are a Toys R' Us stockkholder.
Ok.....
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adds to the cost of the average toy that Toys R Us makes, out of the THOUSANDS that they make and millions they sell? 1 cent maybe? 5 cents? This is another emotional argument not based upon facts
And in every other way mistaken. Your statement is an emotional one, one that is easy to toss off in a sociology or political science class, but one that lacks fact or merit, sorry. The CEO market works precisely like every other one, including as in my earlier post, the pro athlete market. Most of the standards of performance are public, and the market works publicly. And in fact, CEO's are more accountable than athletes are--they get forced out all the time--the average CEO tenure is three years--most pro athletes stay with the team regardless of performance. And their jobs are tremendously important to both emplyees and investors, many of whom are average people like all of us (though pensions and 401k's). Your argument is based upon emotion, not upon fact.
But the free market usually - er, SHOULD - compensate CEOs based on their ability to extract shareholder value maximally. DB didn't do that in his previous role.
But a for profit company is different than Michigan. Toys R Us isn't a charity and for some reason they believe that Brandon is worth the money they are going to pay him.
I sort of disagree with this.
The truth is most board members are now CEOs from other companies, former CEOs, retired CEOs, other C-level execs and often the Chairman of said board is the CEO himself in many public companies.
So a body of CEOs and other C level execs set the pay of CEOs. The voter class can vote for limitations but in practice its rarely if ever applied. Major shareholders like mutual funds and pension plans are not in the world to be activist investors. And yes you can find me exceptions - I know there are - but it is RARE they ever act on compensation.
So to put in a parallel world - if I was an accountant at company 1 and my pay was not set by my boss but instead a pool of 8 other accountants at the same level as me.... and I was part of a group of 8 that set THEIR pay.... what do you think happens to salaries? They skyrocket because we all have an inherent interest in making our salary pool higher.
If all workers had their pay set like CEOs every company would be out of business within a year IMO.
As for CEOs being forced out - they often get massive golden parachutes for failure. So "being forced" out is sort of a silly way to look at it in terms of being punitive. Compensation is such that if you fail, suceed, or are neutral to a company you have created generational wealth for your own family in a few short years. What happens to the company at that point doesn't matter - your pay is so extreme you've already set up your family for generations. So what is the "penalty" of being fired nowadays. Oh you go be an athletic director and then are recyled 8 years later into the same job elsewhere.
And as for those who argue they have some great ability that requires their pay to be 400-600x the average worker (when those same CEOs were doing fine at 8-15x back in the 1970s) somehow Japanese and German multinational companies have functioning CEOs of global companies at far lower pay. Maybe it is because labor is part of their boards - and is not in the U.S.
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Labor being a part of the board? Why that's socialist! Communist! I tell you!
Go back to Russia! Thanks Obama! (Shakes fist violently)
Well I am biased but I think Germany has the best balance of social v capitalistic instincts. Of course that immediately makes me a socialist per some in this country ;) (many of whom probably drive Beemers thus supporting the socialists!!) One small example - during the financial crisis rather than the U.S. system where there were massive layoffs and now 6 years later we are only now getting close to the same level of employment they agreed with a lot of large companies at the govt level to cut back hours worked but then subsidize the difference in pay to a degree thus not impacting workers so dramatically as here both short and long term.
So German worker got dropped from 40 hrs a week in 2008-2009 to 24 hrs and govt comes and makes up a portion of the lost wages. German worker continues to keep skills relevant, company doesnt cut to the bone and put ever more pressure on each remaining worker to do more with even less and then when times go back to good you are ready to expand quickly in Germany. In U.S. those workers often were out of work for years at a time, lost some skills, many become long term unemployed (a big problem now) and now companies complain they cannot find skilled labor.
And yes labor is represented on the boards. Lost in the discussion of lower wages is profits for public corporations are at all time highs. But much more now goes to capital/shareholders v labor then 10-20-30 years ago. One can make arguments about the long term implications of that but I think it's pretty clear in the increasing segmentation of society. It is not going to change because that is how the incentives are set up - CEOs are paid on share price increasingly and using money for share buybacks (or to offset a monster amount of options that said CEO gets) is going to benefit him/her than a general wage increase.
Anyhow I should not even type these things because I know the retort: "you should just move to Germany if you like it so much!! Murica!" ;)
yep yep yep
The reason they are paid a lot is not because CEOs set their own pay. Yes, board members are often CEOs, but they are more often retired CEOs. This may mean they are more likely to understand what a CEO does and compensate better than others will, but the end of the day the shareholder is king. The people who own those coporations, large mutual funds, hedge funds and other institutional investors do not mess around when something concerns their money. The guys who run Hedge Funds, Mutual Funds and Banks are sharks, downright coldblooded. They don't give a shit about helping out their buddies, they want to make money. They will only pay someone what they believe they are worth, that just tends to be more than we usually think they are worth. It is similiar to the coaching market, teams are so desperate to win that they will pay a coach an exorbitant amount of money if they think they will help them better than the next person. Harbaugh himself said he isn't worth 5 million a year (more than what most CEOs make), but that was what he was worth to the team and stakeholders so that is what he was paid.
Well thought out and rational, unlike most of the other posts that are anti-CEO pay.
CEO pay had increased because it can, exactly like Pro Athlete pay, entertainer pay, and other forms of compensation. It will stop increasing when there is less money in the economy or in those fields. You are stretching logic to assume that since you (correctly) state that the majority of Board members are former or current CEO's, that there is some cabal that decides it. The simple fact is that the salary information is public, which is in itself inflationary to salaries. If one board pays some CEO 10 million, a hundred other CEO's that make 9 mil know about it instantly, and some of them are better than the guy getting 10--and their boards know it. If your pay as an accountant was known to all accountants in your firm and all other firms, there would be constant salary agitation--one reason why most people's salaries are private.
When CEO's get forced out, which happens all the time, the fact that they are rich is what, unfair? Why is that? They became a CEO because they suceeded at their previous job as a CFO or COO (or previous CEO job), so they have achieved. If you got fired publicly from your accountant position and everyone knew it, and there was a press release, would that hurt go away because you had a lot of money? The point isn't how much they made, its that they are accountable to shareholders and if they don't perform they are out. Why do we have to make sure they have less money too? This is what I mean when I say these arguments are often more emotional than practical.
I tend to side with the 'market decides value' argument a lot, but I'm so with the annoyance over the golden parachute thing. My company acquired an activist investor and they promptly (and quietly) filed multi-million dollar golden parachutes for each of them with the SEC. I was just like "OH. So making a million dollars a year isn't enough? So can I just vote myself a nice golden parachute too? I declare that I get a billion dollars if I'm fired. Voila!"
"The CEO market works precisely like every other one."
If you attended the University of Michigan and took even one economics or business class, your professors failed you miserably.
The notion the David Brandon's salary at Toys R Us is determined by market forces is laughable.
I would love to hear you explain how market forces determined the salary of Richard Fuld Jr., former CEO of Lehman brothers. Between 2000 and 2007, he made 350 million dollars. In 2008, Lehman Brothers declared bankruptcy. So was the market extremely stupid, or was the market nonexistent? A properly functioning market would've recognized extremely inadequate performance and dramatically curtailed demand. Due to a combination of imperfect information and cronyism, that didn't happen. The man listed in Time Magazine's "25 People Responsible for the Financial Crisis" walked away a half-billionaire.
The fact that you think it is "laughable" that market forces set CEO salaries is like whoa, incisive and devastating commentary on my point. I give.
I will give a poor, similarly laughable attempt to answer--Lehman Bros was one of the most successful and profitable houses on Wall Street prior to the crisis. Fuld made hundreds of millions because of it, as did many of his people. The the crisis hit, and even if you stipulate that it was his fault and he made bad decisions that cost the company, what do you propose to do--strip him of the money he made previously, money made because of good decisions that made tons of profit? On precisely what basis may I ask? He and other successful CEO's didn't magically ascend to their thrones by divine right and with no accomplishments, they became CEO's because they were successful. Then he failed. Should failure wipe out his entire previous life and income? And if so why, and who decides that? What do you propose, a panel of enlightened progressive lawmakers who examine each case of failure and decide how much money to strip a person of?
Yep those toxic combinations of CDOs, MBSs, ARMs and other ABSs sure did make em rich...
that they made money? Ok, if you say so. Financial engineering that was entirely legal, and benefitted their shareholders (and themselves of course) enormously. You don't think they should have done that? Who do you think their custimers were? Other large companies, as well as you and I. Every person that took out a mortgage they couldn't afford, took out a brand equity note (in other words, a second mortgage), thought real estate could never go down, bought homes on spec because of that to flip, and invested in real estate during the boom. No bubbles form without a willing market of buyers.
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What's preventing you from joining the cartel?
We all get how capitalism works, dude, you're not teaching anyone anything they haven't already hear before. Sometimes, however, some of us *gasp" question whether or not the system functions in a just, fair, and or reasonable manner. Sorry if some of use don't workship at the altar of the all-knowing "free-market" (which doesn't exist in any country as was defined by Adam Smith).
It quite clearly is envy. How else can one see complaints over a single employee's pay(who matters far more than any other employeed)?
Fair? You think it's fair that a worker whose importance to a company is limited to(at best) a single department should see a payrate not that far beyond that of a person is much more important? That isn't fair at all. That's also a gross misunderstanding of how successful groups of people work.
Question: Who made Michigan football? Not the player. It was the coaches we call Yost, Crisler, and Bo. It was a single man motivating, inspiring, and pushing a group of men to achieve success on the field.So too for leaders in other organizations That such men/women are so rare is why they command such large salaries. Due to this rarity it is unfortunately all too common for incompetents to make millions.
As someone who literally works at the lowest level at his place of employment I have more cause to be bitter and envious than any other on here. But I'm not. Being a leader of a large organization is extremely difficult. The pressure of expectations is quite unlike that of any job that we face. Their success or failure is of the upmost importance to the lives of thousands upon thousands of people.
if CEOs were paid based on performance. It would make sense to pay an amazingly good CEO a ton of money, just like you'd pay a great athlete who is way better than your average replacement person. But some random low-level employee is no less replaceable than any CEO, because the position is important in terms of scope, but by no means has a small group of people who could theoretically do it (it is an artificially small pot of candidates created by intentional croneyism).
The problem isn't paying great CEO's crap tons of money. The problem is that today, even completely worthless and incompetent CEO's get paid craptons of money, just because.
Envy? When you got companies like Toys R Us going down the shitter paying Brandon that much dough (very generous, potentially stupid), who do you think is going to suffer the brunt of it when Toys R Us inevitably goes out of business?
The workers, not the suits.
So why exactly do you think the package from Toys R Us is unjust or unfair? And are there other people in other industries that also qualify for wages that in your opinion are unjust or unfair? And who exactly is in charge of deciding that?
I work in asset management and have the opportunity to buy Toys R Us debt if I thought it was the right investment for a particular mandate. I can say without a doubt that this is very generous for the position and the financial health of Toys R Us. Bain is paying Brandon based on his previous experience with Valassis Communications and Domino's and those are both very different tasks than turning a struggling retailer. I'm happy Dave Brandon is still in a position to be a major donor to the University if he hits his long term incentive payments but I do not expect that to happen. Bottom line $8mm per year to babysit a decaying business is generous.
I'm not happy about his tenure as AD, like all of you, but remember that in his post-AD career the University and athletic department stand to benefit if he makes a lot of money and remains a donor.
BBA '01
very true. doubt brandon collects the 18m incentives, and im sure many would cringe upon seeing his name sponsoring something or other on campus - but bottom line, students and student-athletes could potentially benefit from another big time donor. and sure, he was a terrible ad and a questionable dude in general, but still a positive to see michigan grads running big shops
So people like David Bradnon deserve ridiculous salaries because we depend on them for charity? Why not cut out the middle man?