Best Buy deserted its efforts to tie pay to performance after just two years. So the guy who came up with the idea quit.
Don Delves, an independent consultant who worked for Best Buy for 7 years, resigned from the company in July after more than 100 managers received bonuses that weren't tied to performance, Bloomberg reports. Delves opposed the bonuses, which included cash awards of $500,000 and $2 million in restricted stock for four top executives.
Best Buy is paying its interim CEO Mike Mikan $3.3 million per year, an amount that one executive compensation expert at Yale called "ridiculous" since Mikan's position is temporary, according to the Star Tribune.
Why so ridiculous? Best Buy has been struggling in recent months with plunging profits and without a permanent CEO. The company is using the bonuses in part to prevent a management exodus, telling Reuters in a statement that the bonuses "are intended to ensure leadership continuity at Best Buy." Best Buy did not respond to a request for comment from The Huffington Post.
Under Delves' guidance, Best Buy adopted new executive compensation principles in 2010, which included a provision ensuring that "that pay is clearly tied to... performance," in the words of Frank Trestman, then-chairman of Best Buy's compensation and human resources committee.
The company is abandoning the tying pay to performance strategy amid pretty bad performance. The retailer is struggling as many shoppers try out electronics at Best Buy stores but then buy the products cheaper online or at discount stores. Best Buy announced earlier this month that it is laying off 2,400 employees, or 1.4 percent of its workforce. The company's stock price has plummeted 38 percent since last year.
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