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Penney Wise, But Way Too Late: CEO’s Pay Slashed 98%

Written by Gary North on April 3, 2013

The CEO of J. C. Penney just had his pay cut by 98%. How much will he be paid? About $2 million.

This means he was being paid over $50 million. Why did anyone think he was worth this much? He ran the struggling company’s profits into the ground. He ruined its original marketing position by eliminating special discounts that had become Penney’s trademark.

The CEO was hailed as an innovator when he was hired. He was going to be able to breathe new life into the firm. Instead, he took the company over the cliff.

Here was the hoopla in late 2011, just before he took over.

Johnson, who left Apple Inc. (AAPL) in June after building its retail unit, will become CEO on Nov. 1 and take charge of a chain that had three straight annual sales declines before a gain of 1.2 percent in its fiscal 2011. Francis’s hiring suggests Johnson may end J.C. Penney’s pursuit of upscale shoppers and focus on thriving as a mall-based discounter, said Bernard Sosnick, an analyst at Gilford Securities.

“That seems to be a much more effective approach than what they’ve been doing,” Sosnick, who’s based in Melville, New York, said today in a phone interview. He has a “buy” rating on J.C. Penney and a “hold” rating on Target.

Mr. Sosnick made a very bad decision. The stock was about $30 when the new CEO took over. It is under $15 today.

So, Penneys hired a hot-shot who had sold high profit margin Apple products. Why? Because the board thought that he could turn around a stodgy, struggling company that sells sheets to middle-age women.

The guy refused to move to Plano, Texas, where the firm is headquartered. Instead, he lives in high-tax California and commutes by business jet.

When a CEO does not care enough about his firm to move to headquarters, sell the company’s shares. They are going down.

The free market works. The CEO will probably not get his pre-Penneys reputation back. He is now a whiz kid emeritus. He will be known as the guy who took over as captain of the Titanic after it hit the iceberg.

What ever happened to hiring from within the ranks? Gone. There is a very good book about this change: The Puritan Gift. The change began in the 1970s. It was a big mistake.

Continue Reading on www.nytimes.com

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37 thoughts on “Penney Wise, But Way Too Late: CEO’s Pay Slashed 98%

  1. Consider how much business they lost when they went with the gay promotion as I am sure they lost a lot of customers that were loyal to them for decades because of this.

  2. I new the guy had to be a left-winger. he certainly added big to the destruction of one of my favorite stores. I have now switched to a local small store in my hometown and frequently go to Macy's where I get exceptional deals. I recently bought a pair of slacks and a top for $12 total. I saved $84. You can't get deals like that at JCP anymore.

  3. I see great JC Penney deals online where you get it shipped free-to-store for pickup, but there ain't no Penneys left in town to pick up at!

  4. Seymour Kleerly says:

    Capitalism has major flaws. Greed is NOT good!

  5. What does greed have to do with a flawed business model from an ill advised hire? Where is the element of greed in the fact that customers didn't embrace the new marketing strategy this over-hyped "genius" put in place? What greed are you referring to? His salary? How is his salary responsible for the failure of the go-to-market plan? If someone offered you a boat load of money to do a job, would you not take it?

    Wise up, your ignorance is on full display.

  6. OregonMuse says:

    "The free market works. The CEO will probably not get his pre-Penneys reputation back." I think this is wrong. Failed CEOs never seem to have any problems getting other CEO jobs. Like Carly whatserface, Fiorina, who ran HP into the ground, and then finagled a sweet $20 million severance package. Nice work, if you can get it.

  7. He didn't take over the Titanic AFTER it hit the iceberg, he steered it directly INTO the iceberg. What an idiot. We shop at Kohl's now.

  8. Failure is the free market at work! He was hired in the free market by Penney to run the company. They made a decision that he was the best fit for their need. He has failed. That is what happens in free markets. Should he be hired by someone else, that is their choice in the free market. They can see his record and make a decision.

    The free market and capitalism work because there are consequences and failure is one of those consequences.

    Your choice in the free market is to not buy stock in a company that hires him or any other CEO you feel is a poor choice. You can chose not to patronize a business he is associated with. Those are your choices.

    Now let's look at the secession of CEO's since the government took over General Motors. That is NOT the free market at work.

  9. Oopsy doopsy — we have some Democrat-styled math going on here (in other words — wrong). A 98% cut would bring it to $1 million. $2 million represents a 96% cut.

  10. Yes, capitalism has major flaws — yet it still has far fewer than any other alternative that has been tried. Life has flaws. Democratic capitalism, with its flaws, has lifted vastly more people out of oppression and poverty than any other system in world history. There are countless examples — consider South Korea, for instance. When a person acts in their own self-interest they are naturally more productive. What is greedy is when a government siphons off a huge portion of what is produced. This is sinister, and results in lowering the incentive of the producer. It's a basic as the nose on your liberal face.

  11. "The CEO of J. C. Penney just had his pay cut by 98%. How much will he be paid? About $2 million.
    This means he was being paid over $50 million."

    Math Alert! If his pay was cut 98%, it is now 2% of what it was. If 2% is 2%, the he was being paid $100 million, not %50 million.

  12. "The CEO of J. C. Penney just had his pay cut by 98%. How much will he be paid? About $2 million.
    This means he was being paid over $50 million."

    Math Alert! If his pay was cut 98%, it is now 2% of what it was. If 2% is $2 million, then he was being paid $100 million, not $50 million.

    Sorry for all the typos in the original.

  13. The Titanic is a flawed analogy in this instance. JC Penney was a business in decline, heading for death. His turn-around strategy is failing. While he may be responsible for it's ultimate demise, it was a patient on life support when he took it over. There is much to blame him for and to blame the board who hired him for, but he is not the root cause of their core problem.

  14. Right on, Mark. This is the fundamental flaw of the anti-capitalists. Their preferred alternatives have proven failures in every instance where it has been tried. Korea is a great example where you look at the contrast between North and South. One has replaced Japan as the electronics supplier to the world and the other has starving citizens and a lunatic member of the lucky sperm club as a leader, threatening war with the US. Anti-capitalists are generally ill-informed and/or under-achievers looking for excuses for their lack of success.

    And most of capitalism's flaws are when it becomes corrupted by the government (politician) and crony capitalist collusion. I could be more specific, but you know what I mean….cough cough Goldman Sachs cough cough……

  15. God Save America says:

    Please do the math! If 2 percent is 2 million dollars, the other 98 percent is another 98 million – so, he was making 100 million!

  16. LOL. Then he backed the Titanic up and whacked the iceberg again on the leeward side.

  17. I vote with my pocket book , and I don't support anti-2nd amendment people , I don't support the homosexual agenda , and I don't support infant murderers . Therefore , I nor my family have spent a nickel at JC Penny's in many years .

  18. His pushing the gay agenda is what turned me off Penney's. I used to buy most everything there unless I needed a specialty item. no more.

  19. Gloria P. Sterling says:

    It would really be nice if it had stayed the way Mr. J.C., himself, started it. It was one of the best places in the world to shop at that time. Telling my age, but who cares. Today is my 82nd birthday and I am independent in everyway with children and grandchildren and greatgrandchildren who love me. I am blessed! HalleluYah!!!!!!!!!!!!!

  20. Let all the Gays shop there see if there are enough of them to keep pennys going I dont think so I wont shop there because they love the gays so much let them have all them and see how long they stay in buissness good by pennys nice noing you

  21. Jimbo999 says:

    My company from which I retired, NCR, basically owned Dayton, Ohio for over 100 years. Practically every high school graduate who wasn't going to college, wanted to work at "The Cash". Through a couple of decades of gross mismanagement, and a temporary "merger" with AT&T, the company started treating it's employees like dirt, something to be used up and thrown away. Mark Hurd was caught doing some untoward things and left for HP where he continued his deceitful ways until he was fired.

    Then the company hired Bill Nuti, who apparently subscribes to the same business ethics that JCP's Johnson does. Nuti became the CEO, but kept his office in the Empire State Building in NYC, had never been to Dayton, Ohio, and never intended to ever visit there. Then he took tens of millions of dollars in Obama's stimulus funds from Georgia, meant to create jobs, and moved the whole company to Georgia…creating 1200 jobs there, but losing 1200 jobs in Ohio.

    The question is, "Do they still teach business ethics in Colleges and Universities?"

  22. jimbo999 says:

    It must be the "new math" they tried to push us into.

  23. jimbo999 says:

    This is the same Democrat math that explains that the sequester is a cut, when it actually raises the spending by 1%. Obama wanted to raise it by 3% so he says it's a 2% cut.

    My doctor told me to lose some weight last year, so I only gained 3 pounds. I expected to gain 10 pounds, so I "lost" 7 pounds

  24. jimbo999 says:

    My wife like to shop at JCP and has for decades. I would take her there and while shopped and tried on clothes I would look around. My latest obsession was to look at the tags in the clothing to see where it was made. Starting about 6 years ago, this is what I saw:

    Made in China
    Made in Cambodia
    Made in Vietnam
    Made in Guatamala
    Made in Chile
    Made in Pakistan
    Made in Mexico
    Made in Argentina
    Made in India
    Made in Indonesia
    Made in Philippines
    Made in Jordan
    Etc. etc.

    It wasn't until about 2 months ago, that I actually saw a blouse that said, Made in The United States. That was the only item I saw in the last 6 years that wasn't imported. Some of the items are imported from places where they hate us. Some of the items are made by slave labor, or by girls and boys as young as 10.

  25. That is why I stopped shopping at Gay Sees Pennies. I just felt that they no longer wanted my business, since they were catering to the gay community. Sort of sickens me, as I always shopped for my grandchildren at Penny's & Bergners. Too bad, but the Board should have done something much sooner, instead of waiting "THREE" years? I have not been in a Penny's store for about two years, and I will not go into one now. Hopefully there are enough people in the gay community to support this store.

  26. jimbo999 says:

    Johnson came from Apple, where you could sell a rock if it has an Apple logo on it. And because of the logo, you could sell it for twice as much as a rock that said DELL or HP on it.
    Loonies buy Apple stuff because "they care about us and the environment, and gay rights, and animal rights, etc." Face it, If they cared about you, they wouldn't charge you twice as much.

    Johnson thought he could do that at JCP…charge you more because it came from Penney's. People remembered that the slacks they paid $12.00 for last fall are now $19.00, and they will never be "on sale" again, ever.

  27. Paul Cardel says:

    Mr. Johnson did not answer a complaint letter about a defective carpet that I was stopped cold with locally. The store manager would not make an adjustment and that is why I finally wrote to Mr. Johns0n. He did not even have the courtesy to have a secretary to answer my letter with a form letter. It was totally ignored. Mr.. Johnson is lucky to even have a job. I have not set foot in J C Penny's since then!

  28. That blouse must've been on the shelf for years–I didn't think we had a textile/clothing industry anymore.

  29. Mr. Johnson don't need no stinking job–He just worked a number of years for megabucks.

  30. This company would not listen to its most loyal customers and now won't be able to get them back. They should have listened and admitted mistakes that they miscalculated. But no, ego gets in the way and no one will still admit they were wrong. Bye Penneys. After 100 years in business it took a dumba$$ to ruin it in 100 days.

  31. Jeanne Stotler says:

    I shopped for years at JC Penney's, this was the first store in the 60's to carry size 2, I loved the catalog, actually could see what you were getting. Last year wanted a stole for granddaughters wedding, went on line and pictures were really bad, went to store and the ones in store were costly and cheezy, ended up going to a store in mall and got a real nice stole for less than 1/2 of the price for JCP, wanted to replace my kitchen rugs, JCP no longer carries these, I too, shop Kohl's. Penney's no longer appeals to me after 50 years of a faithful shopper.

  32. Jeanne Stotler says:

    Soon JC Penney's will go the way of Montgomery Wards and Spiegel's, the only reason Sears has not failed is due to appliances , all cater to outlandish styles and ignore the average shopper. Kohl's and Macy's will get more business and small catalog companies will also benefit.

  33. VoiceOfReason says:

    Same for our family, we haven't been a Penney's for the past several years–in fact when we walk the mall, we will not enter their store. When they picked Ellen DeGeneres as their spokesperson, that did it for us.

  34. VoiceOfReason says:

    The AF assigned me to WPAFB, near Dayton, in 1977. The company was making mechanical cash registers there and was moving to manufacture electronic cash registers. The union went on strike for higher wages. NCR management told the union that NCR was going to quit manufacturing mechanical cash registers, but if the would end the strike, NCR would convert Dayton manufacturing to electronic cash registers. The union basically gave NCR the upraised middle digit, telling NCR that mechanical cash registers would never be obsolete. NCR shut down Dayton manufacturing, destroyed the buildings and built their electronic cash register systems elsewhere.

  35. No greed happening there…….Flawed business model yes and nothing wrong with his salary as long as company was producing…..Capitalism and free enterprise is what our country is built on…Now we have the give me mentality with 52% of the country…..This is major wrong thinking. Penney's is pushing Homosexual and Lesbian support and now Starbucks has said the same thing……..This is a major flaw in both business plans, since I will not be spending money at either place any more…..THAT is a POOR business model…….

  36. It was the gay agenda that turned me off. This was a family oriented store that turned its back TOTALLY on families. If you want to be gay, I have no problem with that, just don't shove it down my throat and my kids throat.

  37. My conscience would never let me ever use JC Penny ever again… good riddance.