Best Buy's decision to put a hospitality industry veteran at the helm of the troubled electronics retailer was surprising enough, but one condition of Hubert Joly's compensation package raised even more eyebrows: A stipulation that if the French citizen can't get authorization to work in the U.S., he will receive a payout of $6.25 million.
"I have never seen anything like this before, in my 19 years of researching executive pay," Paul Hodgson, chief research analyst at GMI Ratings, said via email, dubbing the deal a "golden green card."
"I can understand some payment but this does seem a windfall," John Coffee, a professor at Columbia Law School who specializes in corporate governance issues, said via email. " The theory must be that he is assuming the risk of leaving his current employer... but we do not know what his existing compensation is."
Best Buy's incoming CEO formerly was CEO of Carlson, a privately-held hotel and restaurant company. Sam Hamadeh, CEO of private market research firm PrivCo, estimated based on Carlson's size and corporate structure that Joly drew a base salary of around $1 million, with an additional $2 million or $3 million in performance incentives.
"This package was developed in consultation with leading search and compensation firms and is in-line with best practice for Fortune 50 companies," a Best Buy spokesperson said via email.
At $1.175 million, Joly's base salary isn't eye-popping. But cash and stock incentives could inflate that compensation package as high as $32 million if Joly can meet certain benchmarks in his new position.
The Best Buy spokesperson said, "Two thirds of the amount... is a one-time payment intended solely to make Mr. Joly whole for the outstanding compensation he left behind in departing Carlson, his previous employer. The amount that can accurately be described as compensation going forward is weighted approximately 90 percent to variable incentives."
The news of Joly's appointment came a day before the company announced net earnings of $12 million for the quarter, compared to $150 million in the same quarter last year. The news sent Best Buy's stock tumbling.
Some compensation experts said the struggling big-box retailer might not have had much of a choice but to offer Joly a compensation package with such an extraordinary stipulation. "It seems like a very high amount and yet... he's in a strong negotiating position," said John Challenger, CEO of executive outplacement firm Challenger Gray & Christmas. Challenger said he didn't know of a similar situation in which an incoming chief executive would be paid even if he was unable to accept the job.
"When you have the former owner trying to take the company private, talent that is capable comes with circumstances that are unique," said Gayle Mattson, executive vice president and global leader of the board and CEO practice at DHR International.
Best Buy is currently engaged in a takeover fight with its founder and former chairman, Richard Schulze, who has offered to buy the struggling electronics retailer and take it private in a deal that values the company at more than $8.1 billion
Analysts were mixed in their assessment of Joly. "We view this move as a positive as it could bring the company some much needed energy and a differentiated perspective," Raymond James analyst Dan Wewer said in a research note.
R.J. Hottovy, an analyst at Morningstar, was more pessimistic in an interview with CNBC as he discussed secular problems facing the consumer electronics retailer, saying the company's margins are in a "downward spiral" and that "Best Buy just can’t compete as it’s currently structured."
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