Intellectual Property. Russell L. Parr

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СКАЧАТЬ are often underpaid, while average performers are often overpaid.”² In support of this statement, the Wall Street Journal cited the following:

       CBS Corp. paid its chief, Leslie Moonves, $69.3 million last year; total shareholder return was negative 6.2%. His pay was virtually unchanged from $69.6 million in 2016 when the broadcaster achieved a one-year return of 37%.

       Allergan PLC's Brent Saunders received a 700% raise in 2017 to $32.8 million, despite total shareholder return of negative 21%. The compensation package came during a year when Allergan ran into patent setbacks for one of its best sellers, dry-eye drug Restasis, which contributed to a 22% drop in the firm's share price for the year.

       One of the biggest gaps between CEO pay and shareholder return was at aerospace-parts company TransDigm Group Inc. For much of the year, TransDigm's stock took a beating from short sellers who criticized its acquisition-driven business model, but the volatility had little effect on then-CEO Nicholas Howley's pay package. Shares, including reinvested dividends, returned just shy of 5% for the fiscal year that ended September 30, 2017, underperforming the broader S&P 500 index for the first time in a decade. During the same period, Mr. Howley earned $61 million, more than triple the $18.9 million he made in 2016.³

      An extreme and contradictory case of the value of a CEO involves LuluLemon Athletica. In June 2018, share prices of the company which sells “athleisure wear,” turning pricey women's yoga wear into mainstream fashion, were up nearly 15.5% at $121.26. This happened without a CEO.

      CEO Laurent Potdevin had a multi-year relationship with a female designer at the company he oversaw. This was one of the issues that caused his departure from the company on February 5, 2018. A company statement indicated that Potdevin “fell short of … standards of conduct.” LuluLemon did not find a replacement for the CEO job until July 2018 but during the interim the company prospered and the company share price soared.

      It can be argued that the strategic plan Potdevin put in place leading up to his departure fueled LuluLemon's success, but this brings up the question about the need for a high-paid CEO. Once a strategic plan is established, is there a need for a highly paid CEO? Companies may find that temporarily employing a strategic planning consultant to establish a plan, then leaving execution to other employees, can serve just as well as employing a high-priced centerpiece for the long haul.

      When considering the value of the CEO as part of an assembled workforce, their value may not be indicated by their compensation package unless it is supported by shareholder returns.

KEY PERSONNEL CAN BITE YOU IN YOUR SHARE PRICE

      The private actions of key company personnel have also had significant impact on company share prices. Sexual harassment accusations and other offensive behaviors have recently strained company share prices, further bringing into question the value of key personnel to a company. Consider the results of recent questionable behaviors by key personnel.

       POOR LANGUAGE BY PAPA JOHN'S CEO COST INVESTORS 43% IN STOCK VALUE

      John H. Schnatter is the founder of Papa John's International, Inc. He assumed the position of Papa John and was featured on national television commercials for the business. The company slogan is Better Ingredients, Better Pizza. Schnatter stepped down as CEO on January 1, 2018, after comments he made criticizing National Football League commissioner Roger Goodell for not doing anything about national anthem protests.

      In late 2016, some NFL players had started to kneel before the start of a game during the playing of the national anthem. The protests by players about racial injustice were divisive. While many people across the country, especially NFL fans, acknowledged the players' rights to protest, they also strongly felt that kneeling during the national anthem was beyond inappropriate. Members of the military and veterans thought the move by the players was disrespectful to their sacrifices. NFL leadership found itself in an impossible position and were slow to take a stand on the issue and even slower to develop a compromise.

In the fall of 2017, Schnatter, then-CEO of Papa John's, blamed the company's poor quarterly earnings report on the “controversy,” saying it was an aftereffect of the league's “poor leadership” and “should have been nipped in the bud a year and a half ago.”⁴ Papa John's had been the NFL's official pizza sponsor since 2010 and advertised heavily during games. The company reacted to Schnatter's statement by removing him as CEO on January 1, 2018.

Another scandal broke out over use by Schnatter of a racial slur during a conference call, while trying to minimize controversy over other politically charged comments. Schnatter later asserted that Colonel Sanders had used the slur and it had not affected his popularity. Schnatter also apologized for the slur, saying it was “inappropriate and hurtful.”

Making matters worse, Schnatter's comments were praised by white supremacists, and Papa John's responded by saying it did not want white supremacists or their groups buying its pizzas. Mr. Schnatter, an outsized figure at the company who appeared frequently in its commercials and owns 30 percent of its stock, stepped down as chief executive and resigned as chairman of the board in May 2018.⁵

      Papa John's International, Inc. operates and franchises pizza delivery and carryout restaurants under the Papa John's trademark in the United States and internationally. It operates through five segments: Domestic Company-Owned Restaurants, North America Commissaries, North America Franchising, International Operations, and All Others. The company also operates dine-in and delivery restaurants. As of December 31, 2017, it operated 5,199 Papa John's restaurants, which included 743 company-owned and 4,456 franchised restaurants. The company was founded by John Schnatter in 1984, after selling his car and borrowing money to start his first pizza place.

      In mid-January 2018, shares of Papa John's traded at $68.62 per share. As turmoil swirled over the comments by Schnatter and his removal as CEO and resignation from the board, the share price dropped to $38.94 by August 8, 2018; a 43% drop in only seven months. With 31.62 million shares outstanding, the $29.68 per share drop in value equaled a loss of $938 million.

       LES MOONVES AND SEXUAL HARASSMENT CHARGES COST INVESTORS $2 BILLION

CBS Corporation operates as a mass media company worldwide. The company operates through four segments: Entertainment, Cable Networks, Publishing, and Local Media. The Entertainment segment distributes a schedule of news and public affairs broadcasts, and sports and entertainment programming; produces, acquires, and/or distributes programming, including series, specials, news, and public affairs; operates online content networks for information and entertainment; produces, acquires, and distributes theatrical motion pictures; and provides digital streaming services. The Cable Networks segment offers subscription program services, such as original series, theatrical feature films, documentaries, boxing and other sports-related programming, and special events. This segment also operates CBS Sports Network, a 24-hour cable program service that provides college sports and related content; and Smithsonian Networks, which operates a channel featuring cultural, historical, scientific, and educational programs. The Publishing segment publishes and distributes adult and children's consumer books in printed, digital, and audio formats; develops special imprints and publishes titles based on the products of the company, as well as that of third parties; and distributes products for other publishers. This segment also delivers content and promotes СКАЧАТЬ