Ronald B. Johnson, J.C. Penney Co. Inc.’s chief executive officer, received $53.3 million in total compensation last year, mostly in stock awards, according to the company’s proxy filed Wednesday with the Securities and Exchange Commission.
In 2011, Johnson’s base salary was $375,000, reflecting his pro-rated salary base starting on Nov. 1, when he joined the company. Stock awards totaled nearly $52.7 million, while an incentive bonus totaled $236,302.
Johnson normally would receive a base salary of $1.5 million, and is eligible to participate in the company’s incentive bonus plan with a target of 125 percent of base salary up to a maximum bonus equal to 250 percent of base salary, the regulatory filing said.
Former ceo Myron E. “Mike” Ullman 3rd, who received a 164 percent increase in total compensation, took home a pay package of $34.6 million compared with $13.1 million in 2010. That includes $1.5 million in base salary, $11.4 million in stock awards, $3.6 million in option awards and $1.9 million from an incentive bonus. The balance of the pay package comprised mostly compensation from a transition agreement as he retired and made way for his successor. Ullman has a non-compete provision in his employment agreement for 18 months following his retirement on Jan. 27.
Michael R. Francis, who started in October as president, received $44.7 million in total compensation. His pro-rated base salary was $395,000 and an incentive bonus was $197,260. He also received a $12 million starting bonus and $32.1 million in stock awards. He would normally be entitled to a base salary of $1.2 million, with incentive bonus target of 100 percent of base salary and a maximum bonus of 200 percent of base salary
Michael W. Kramer began as chief operating officer in December. His total compensation last year was $33.4 million, with a pro-rated base salary of $159,091 and an incentive bonus of $71,507. He also received a $4 million starting bonus, as well as $29.1 million in stock awards. He would normally be entitled to a base salary of $1 million, with incentive bonus target of 90 percent of base salary and a maximum bonus equal to 180 percent of base salary.
The company said its annual meeting of stockholders will be held on May 18 at 10 a.m. at the retailer’s home office in Plano, Tex.
Separately, J.C. Penney said its new pricing strategies could mean a prolonged decline in sales and that there was no guarantee those strategies would be successful.
Those two cautionary notes were disclosed in the annual report that the retailer also filed Wednesday with the SEC. The filing specifically said that the changes in pricing strategies unveiled in January involving a six-pronged approach “could result in a prolonged decline in sales” and that there was no guarantee that the strategies “will be successful.”
The company disclosed in late January its plans to become America’s favorite store, and on Feb. 1 introduced a pricing and promotional strategy called Fair and Square. The transformational strategy is based on the six P’s of retail: price, promotion, personality, product, presentation and place.
The company also said that there was no guarantee that the transformational plan would be successfully implemented, which “may result in an adverse impact on our business and financial results.”
The retailer said between transition costs and sign-on bonuses, the company’s management transition costs totaled $130 million in 2011. The changes included the hiring of Johnson and his new team as Ullman prepared to retire.
The company also detailed its free cash flow, which for 2011 on a non-general accepted accounting principles basis was $23 million. In 2010, free cash flow was $158 million. The company said the decrease was due to an increase in its capital expenditures last year, or $634 million spent on store modernizations, opening 77 Sephora shops inside J.C. Penney stores, 423 MNG by Mango shops, 502 Call It Spring shops and 10 Foundry stores.
The filing said that last year women’s apparel was 25 percent of the merchandise mix, with men’s apparel and accessories at 20 percent. While home was 15 percent of the mix, women’s accessories, including Sephora, was at 12 percent.
As of March 1, Pershing Square Capital Management beneficially owned 18 percent of its outstanding shares of the retailer’s common stock. The filing noted that Pershing also has additional exposure to 7.6 percent of the outstanding shares under cash settled total return swaps, bringing the total exposure to 25.6 percent of shares. Vornado Realty Trust beneficially owned 10.8 percent of the outstanding shares of common stock. The two together own a total of 28.8 percent of the outstanding shares and, including the return swaps, potentially have a combined exposure totaling 36.4 percent of the outstanding shares.
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