Toys R Us & Executive Compensation (Long Anger)

Last week there was an uproar about Toys R Us' motion seeking approval of a proposed executive incentive plan. Then the Official Committee of Unsecured Creditors (UCC) came in, negotiated down the sweetheart arrangement, and filed a statement in support of the company's motion. We wrote about it all here. Since then, the bankruptcy court held a hearing and despite continued objection by the United States Trustee for the Department of Justice, the court approved the plan. Color us unsurprised. Also color us impressed by the company's sequencing.

There is 100% strategy embedded in the Company's plan, just weeks before Christmas, to get approval of its incentive plan. Note that we also highlighted that the company recently filed its store closure motion and that it only sets forth procedures for closures rather than specifically identifying closures. To date, only UK stores have been identified for closure. We suspect the US number may surprise people; we suspect a lot of employees will be losing their jobs; we suspect people will be pissed and that the incentive plan will reemerge as an issue in that context. On the bright side, at least Toys R Us was able to bring this Xmas's "hot toy" to the market. Oh, wait, that was Walmart($WMT). Womp womp.

All of which brings us, albeit circuitously, to General Electric ($GE). In 2015, former CEO and Chairman Jeff Immelt "earned" $37.25mm which included an 8% bonus increase (to $5.4mm) and a 9% salary hike ($3.8mm). In 2016, Immelt's comp stacked up to a smaller-but-still-impressive $21.3mm. When Immelt retired earlier this year, some figured that he walked away with $211mm. Ironically, by leaving earlier than he originally planned, he presumably got to take advantage of GE's (relatively) higher stock price prior to its utter and disastrous capitulation a few weeks later. 

Then this week, adding insult to injury, GE cut 12,000 jobs in its power equipment division, a 4% reduction of GE's total workforce. Why? Disruption, that's why. The division "has been hit hard by the rise of renewable energy." Notably, the energy business of Alstom - which services coal producers - is part of that division. Immelt, using his infinite "business judgment" (which is to say nothing of the Baker Hughes transaction), purchased Alstom in 2015 for a whopping $10b. Awesome. Timing. Bro. 

What are the ramifications for Immelt? Well, certainly none. He nearly got a new gig as the CEO of the highest valued private company in the world. And once the new tax plan goes into effect he can bequeath his ill-earned wealth to his family free of the shackles of the estate tax. We're sure that seems fair to those 12,000 people looking for jobs on the eve of Christmas.