The Business Journal of Jacksonville follows up on recent stories about how Winn-Dixie CEO Peter Lynch, whose employment contract expires next month, is negotiating an extension with the company’s board of directors so that he can remain with the company until after Winn-Dixie emerges from bankruptcy – which could happen as soon as October 2006.
According to the Journal, “Lynch's importance to the company is apparent. He was the only employee excluded from last summer's worker retention plan approved by the Bankruptcy Court, and instead received a separate annual retainer package approved by the court.
“Winn-Dixie officials and attorneys continually stated the need for an economic incentive beyond his current contract to keep the CEO at the grocer during the bankruptcy. His 2006 bankruptcy retention bonus of $1.15 million vests on Aug. 31 and Winn-Dixie officials have estimated the bankruptcy will last at least through October.”
The problem is that the company says there needs to be an economic incentive clause that covers the time between August 31 and the company’s emergence from bankruptcy – even though Lynch’s employment contract doesn’t expire until December 2007.”
According to the Journal, “Lynch's importance to the company is apparent. He was the only employee excluded from last summer's worker retention plan approved by the Bankruptcy Court, and instead received a separate annual retainer package approved by the court.
“Winn-Dixie officials and attorneys continually stated the need for an economic incentive beyond his current contract to keep the CEO at the grocer during the bankruptcy. His 2006 bankruptcy retention bonus of $1.15 million vests on Aug. 31 and Winn-Dixie officials have estimated the bankruptcy will last at least through October.”
The problem is that the company says there needs to be an economic incentive clause that covers the time between August 31 and the company’s emergence from bankruptcy – even though Lynch’s employment contract doesn’t expire until December 2007.”
- KC's View:
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We know this is way beyond our pay grade, but we simply don’t understand how these things are negotiated and then presented as being in the best interests of the company and the shareholders.
To be clear, we have nothing against Peter Lynch. But it seems to us that it would make a lot more sense, when hiring a turnaround CEO, to pay a decent salary and then make the big payout at the back end – after the company has emerged from bankruptcy, after the turnaround actually has taken place. Having to negotiate new incentives and employment contracts before the job is done just doesn’t make sense.
At least, not common sense.
