America's Least Valuable CEOs
5. Steven Fishman
> Compensation to market cap: $4,814 / $1M market cap
> Compensation: $11.9 million
> Market Cap: $2.5 billion
> Company: Big Lots (NYSE: BIG)
Big Lots’ is one of the largest close-out retailers based in the U.S. The company has just over 1,400 stores spread throughout America and Canada. Its stores are known for providing goods at extremely low prices, it competes in a portion of the retail market that often includes Walmart. Its shares have declined 10% over the last two years. According to the company’s most recent 10-K, revenue rose to $5.2 billion from $5 billion the year before. But net income fell from $223 million to $207 million. Steven Fishman joined Big Lots as CEO in July 2005. His board has consistently treated him generously. Over the last three years, Fishman’s pay has totaled $35 million.
4. Ian Cumming
> Compensation to market cap: $5,066 / $1M market cap
> Compensation: $28.2 million
> Market Cap: $5.6 billion
> Company: Leucadia National (NYSE: LUK)
Leucadia is often referred to as the poor man’s Berkshire Hathaway. It recently said it will buy the portion of investment bank Jefferies it does not already own. Once the transaction is completed, CEO Ian Cummings will stay, but the chief of Jefferies will take over as CEO of the combined operations. Joseph Steinberg and Cumming essentially control Leucadia. The firm’s shares declined more than 20% in the last two years compared to a 12% improvement in the S&P 500. Revenue was up slightly last year from $1.32 billion in 2010 to $1.57 billion in 2011. Much of the revenue came from the firm’s oil services, gaming entertainment operations, and from securities transactions. Because of an accounting change that involved an income tax provision, net income fell from $1.9 billion in 2010 to $25 million in 2011. The figure was also down from $550 million in 2009. Cumming has served as a director and chairman of the board since June 1978. Steinberg has been president since January 1979. Steinberg owns 10% of the firm’s shares and Cumming 9%, so it is not hard to see why compensation is so liberal. As CEO, Cumming’s pay package may be more visible but Steinberg made $28.2 million last year.
3. Dinesh Paliwal
> Compensation to market cap: $6,027 / $1M market cap
> Compensation: $16.1 million
> Market Cap: $2.7 billion
> Company: Harman International (NYSE: HAR)
Shares of Harman, the maker of audio and electronics entertainment products, have sold off 7% during the last two years. Paliwal did well last year, but he has a history of being generously rewarded by his board. Over the three years that ended in 2011 he made more than $42 million. Harman posted good results last year, although some of the growth had to do with a recent acquisition. Revenue rose to $4.36 billion in fiscal 2011 from $3.77 billion in fiscal 2010. Net income was $330 million, up from $136 million the previous year. Sales at Harman’s largest unit, infotainment, which made up 55% of total revenue, grew 15%. The division sells GPS and entertainment hardware, among other products, to car manufacturers such as BMW, Subaru, and Audi.
2. Ronald Johnson
> Compensation to market cap: $7,098 / $1M market cap
> Compensation: $53.3 million
> Market Cap: $7.5 billion
> Company: J.C. Penney (NYSE: JCP)
If there is a shortlist of CEOs at American publicly traded companies who have done an awful job, J.C. Penney’s CEO Ronald Johnson is at the top of it. His move from his role as the head of Apple’s retail operations to the “rescue” of J.C. Penney has been much discussed in the business news media. After his move, Johnson changed Penney’s discount strategy. Revenue then began to drop as much as 20% quarter over previous year’s quarter. Internet sales, critical to any retailer, have fallen even more. Shares are off by nearly 50% over the last two years. Many investors have completely given up on the company. Penney had 1,102 stores when it filed its most recent 10-K. That list of stores is being pruned as results worsen. Revenue was down 2.8% last year to $17.3 billion, but the rate of the drop has accelerated. It is a miracle that Johnson still has his job. But Penney does have a large shareholder, hedge fund Pershing Square, and if its founder William Ackman wants Johnson as CEO. It is unlikely Johnson will be leaving.
1. Michael Jeffries
> Compensation to market cap: $11,450 / $1M market cap
> Compensation: $48.1 million
> Market Cap: $4.2 billion
> Company: Abercrombie & Fitch (NYSE: ANF)
Abercrombie & Fitch posted a good quarter recently, but that was after a longer period in which the retailer suffered as its young, hip customers turned to other brands. Over the last two years, Abercrombie shares fell by 7%. The company and its sub-brands, which include Hollister and Abercrombie Kids, operate out of 1,045 locations. Abercrombie did well on the top line last year but not the bottom. Revenue reached $4.16 billion, up from $3.47 billion the year before. Net income fell from $150 million in 2010 to $128 million over the same period from 2010 to 2011. CEO Michael Jeffries has a long history with the company and is listed as a founder in the Abercrombie proxy. He has served as chairman since May 1998, and as chief executive officer since February 1992. Longevity has its advantages. Jeffries has made $107.6 million as the head of Abercrombie over the last three years.
Douglas A. McIntyre