Have you ever taken a look at annual reports for large corporations? I was reading through some anti-work today and a question arose for me, “What does actually happen to executives when they're let go, or the company fails?” Someone had brought up Bed, Bath, & Beyond so I started there.
In 2019, there were articles about the new CEO, coming in and shaking things up. The first thing I noticed in this article, was that 6 senior executives were “ousted.” No mention of names, but titles were given. I decided to go to the annual reports to see who these people actually were. It's kind of hard to tell because the titles in the 2019 report don't entirely line up with the ones stated in the article. It's not that big of deal, and I decided to just start looking at where these people ended up. This too, is difficult.
Executives don't go looking for jobs on LinkedIn. They're headhunted or brought in by friends. Just for example, and the first person I tried to research, in 2019, a one Mr. Fiorilli was the Senior VP of Stores. What is he up to now? No idea. I can't find any other place listing him as working for them currently. When I read a bit further into the report compensation details, there's a hint as to why.
Under the “Potential Payments Upon Termination or Change in Control” section, which is FILLED with jaw-dropping information on what happens several individuals get terminated for different reasons. To stick with Mr. Fiorilli as the example:
The agreement with Mr. Fiorilli provides for severance pay equal to three years’ salary, and the agreements with Mr. Castagna, Ms. Lattmann and Ms. D’Elia provide for severance pay equal to one year’s salary, if the Company terminates their employment other than for “cause” (including by reason of death or disability). Additionally, the agreements with Messrs. Castagna and Fiorilli also provide for one year’s severance pay if the executive voluntarily leaves the employ of the Company.
So, if this particular executive is let go, and mind you, this is just a SVP, they're handed 3 years worth of compensation. There's other provisions too, like stock options vesting. There's a bit too much for this post to really unpack everything here, but I want to call out the weak definition of “cause.”
“Cause” is defined in the agreements as when the executive has: (i) acted in bad faith or with dishonesty; (ii) willfully failed to follow reasonable and lawful directions of the CEO or the Board of Directors, as applicable; (iii) performed his or her duties with gross negligence; or (iv) been convicted of a felony. Upon a termination of employment by the Company for any reason other than for cause and, in the cases of Ms. Lattmann and Ms. D’Elia, also upon a “constructive termination” (as defined below), all unvested options will vest and become exercisable.
So, do you job to the best of your ability, and even if you fail, you're handed YEARS worth of compensation on your way out the door. The entitlement here is astounding. Executives don't need to worry about doing a good job, just good enough to be given multi-year paid vacations between gigs.
If workers are terminated, we've got unemployment and hoops to jump through to keep even a FRACTION of our previous compensation. I'm not entirely sure yet what workers can do to curtail these abuses of power by the executive class but we cannot continue to let this class of people make or influences the rules governing wages and pricing strategies.