How Sweetheart Deal Gives GameStop CEO a $ 179 Million Great Fun Gift

How Sweetheart Deal Gives GameStop CEO a $ 179 Million Great Fun Gift

GameStop accelerates the timeframe for Sherman to receive the shares, producing the reward

Gamestop Corp. chief executive George Sherman can step down this summer with an unexpected $ 179 million windfall that dwarfs CEOs’ salaries in many larger corporations thanks to a love deal promoted by a burgeoning stock meme rally this year, compensation experts say. GameStop said Monday that Sherman would step down by July 31. A struggling U.S. videogame retailer has been looking for a new leader to work on its e-commerce transformation with chairman Ryan Cohen, the billionaire co-founder and former chief executive of online pet supplies. retailer Chewy Inc.

GameStop decoupled some of Sherman’s salary from its performance last year in the early months of the COVID-19 pandemic and gave it stock when its shares were worth a tiny fraction of their current value, according to a Reuters security filing review and compensation interviews. consultants.

As a condition of its exit, GameStop accelerates the timeframe for Sherman to receive the shares, producing the reward. Sherman, who has been CEO since April 2019, forfeited $ 98 million worth of stock this month because it failed to meet performance targets, GameStop revealed last week. Still, he stands to receive a stock payment currently worth $ 179 million because GameStop has given him more shares related to his tenure in the company rather than to his performance like most companies do with their CEO, said Eric Hoffmann, Farient’s vice president of compensation consultant. Advisors LLC.

“Investors like performance-based awards, which have hard-before-set financial goals that executives must meet to win, rather than time-based shares, where they have to hang on to get them, “Hoffmann said.

A spokeswoman at GameStop in Grapevine, Texas, declined to comment. Sherman did not respond to requests for comment. Cohen, GameStop’s largest shareholder with a 13% stake, could not be reached for comment. The value of Sherman’s severance payment exceeds annual salaries given to many of the top US CEOs. ViacomCBS Inc. CEO Joseph Ianniello took $ 112.9 million in significant pay in 2019, while JPMorgan Chase & Co’s 2019 Jamie Dimon realized the 2019 salary reached $ 107.8 million, according to the latest account from the data provider corporate governance CGLytics.

Other GameStop employees will not unexpectedly share the Sherman. The retailer has been closing hundreds of stores, according to securities disclosures. Shares of GameStop closed at $ 158.53 on Tuesday, a stratospheric rise of about $ 5 last summer, when the company handed Sherman the majority of the stock award. They scurried in January as sole traders on Reddit and other social media platforms grabbed them, squeezing short sellers.

Reuters reported last year how some companies were shielding executives from the financial collapse of the pandemic by moving from performance-based payments to time-based payments. They reasoned that market disruption made it difficult to meet financial targets, and Sherman will benefit from that trend.

Sherman, 59, has been credited internally with the costs of breaking and steering GameStop through the pandemic putting other retailers out of business, Reuters reported last week. But his 25 years of experience has largely been with brick-and-mortar retailers, such as Advance Auto Parts Inc. and Home Depot Inc. Cohen wants a chief executive with skills more suited to GameStop’s digital transformation, Reuters reported.

Vesting of Shares

GameStop gave Sherman approximately 925,000 shares last June that it was due to receive in a third over three years, according to a regulatory filing. He is expected to receive them all at once as he leaves under a “transfer agreement” negotiated this month, as well as about 200,000 more shares that were not previously vested, the filing shows. The filing does not reveal how GameStop’s board decided on these awards.

Sherman also stood to receive 308,477 shares issued last June that were tied to its performance, besides the stock it forfeited last week. He also agreed to give up those performance-based shares, one of the filing shows. It was unclear whether he would have met the performance targets.

GameStop has said Sherman plans to remain on the board of directors without pay to help the next CEO transition into the role.