If Ron Johnson steps down anytime soon as CEO of JC Penney (JCP), the biggest loser might be Ron Johnson.
That notion might make investors do a double-take. Didn’t Johnson get a huge lump of JC Penney stock to woo him away from Apple (AAPL), where he ran its retail stores? Didn’t Penney’s sales drop $4.3 billion last year? What about the thousands of employees who’ve lost their jobs?
All true. But in pure paycheck terms, if you look at the value of the Apple stock awards Johnson forfeited, the drop in value of his JC Penney shares, and the fact that a $50 million Penney warrant he purchased is way underwater—Johnson could be out nearly $140 million.
This stock chart shows why. Since Johnson was named CEO of Penney in June 2011, its shares have fallen about 55%, while Apple’s nearly doubled before plunging to be up "only" 28%, as seen in a stock chart:
Johnson forfeited $80 million in Apple stock awards, worth about $112 million today. To partly reimburse him, JC Penney gave Johnson $53 million in stock—now worth less than $23 million, largely due to his own disastrous strategies. Looking only at these stock awards, if he’d stayed at Apple, Johnson would be $89 million richer today.
It gets worse. When he joined JC Penney, Johnson paid $50 million for a warrant to buy 7.3 million Penney shares at $6.89 a share. But the exercise price is $29.92 a share—a level Penney hasn’t seen since May 2012. If Johnson leaves soon, this money is gone, too.
Johnson, who earns a $1.5 million annual salary, doesn’t have an official severance agreement. If he steps down under normal circumstances, according to the 2012 proxy statement, he gets a grand total of $250,815. If there’s a change in control, such as a sale of the company or Chapter 11 reorganization, he gets $10.4 million.
Johnson is already incredibly wealthy; when he joined JC Penney, the Wall Street Journal reported he’d earned nearly $300 million in recent years from selling Apple stock and exercising options.
Still, even to the richest, $140 million is real money. Maybe it takes this kind of pocketbook analysis for Johnson to understand just how much damage he’s done to JC Penney. And if the board decides to dump him—though they’d probably work out some kind of deal—it won’t cost investors a lot of money to let him go.
Amy Merrick, a contributing editor at YCharts, is a former staff reporter for the Wall Street Journal, where she spent 11 years writing about the Midwest economy, state and municipal finances, and the retail and banking industries. Her work has been published in the Poynter Institute’s Best Newspaper Writing series. She can be reached at firstname.lastname@example.org.
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