JCPenney’s Shameless Board Rewards Departing CEO

JCPenney’s (NYSE: JCP) former chief executive, Myron E. Ullman, III, was pushed out of the company. As a reward for an awful performance in his job, the the retailer’s board gave him a parting gift of $34,561,322 in salary, stock, stock options and “other compensation.” A portion of the payout was a $10,100,000 transition services payment. That is a staggering amount for a CEO who failed shareholders so badly. It is yet another reason that investors are skeptical about how boards treat their managements.

In 2007, JCPenney had revenue of $19.9 billion and net income of $1.13 billion. In 2011, revenue was down to $17.8 billion, and the retailer had net income of $389 million. Over that period, the value of the retailer’s shares dropped more than 55%.

Who should be blamed for keeping Ullman for so long? The board should, particularly those members who have served for more than five years. This includes Colleen C. Barrett , who was CEO of Southwest Air (NYSE: LUV); Thomas J. Engibous, former CEO of Texas Instruments (NASDAQ: TXN) and the new chairman of JCPenney; Leonard H. Roberts, the former CEO of RadioShack (NYSE: RSH); and Kent B. Foster, the former head of Ingram Micro (NYSE: IM). Each has done shareholders a huge disservice and shown again why JCPenney is a second-rate operation.

Douglas A. McIntyre