Views on improving the integrity of global capital markets
26 July 2012

Best Buy or Worst Governance? Comp Consultant Bolts over Executive Bonuses

In the name of financial emergency, should public company directors abandon good governance principles? That is essentially the question posed by recent turmoil at Best Buy (NYSE: BBY). We rarely see the aftermath of a consultant or auditor resign from an engagement with a publicly traded company. Such matters are usually handled quietly, and parting is usually amicable because no consultant or auditor wants to burn bridges or be seen by future clients as difficult to work with. This dynamic is what makes the resignation of the Best Buy compensation consultant, reported earlier this week, so interesting.

To make a long story short, Don Delves, the independent pay consultant who had worked with the compensation committee of the Best Buy board for the last seven years, resigned earlier this month. The disagreement reportedly focused on retention bonuses not tied to performance that were paid to over 100 Best Buy managers and executives. The retention packages were said to contain payments of about $500,000 each. The executives also were to receive $2 million in restricted stock. A lucrative payout in light of the steep decline in Best Buy’s stock price from $30 to $18 over a 12-month period. “Pay for performance” or just “sticking around”?  

I can see Best Buy’s dilemma here. The retailer is going through a Peyton-Place leadership change, its industry is shrinking as more customers buy items online or directly from Best Buy vendors (like Apple), and the majority owner of the company is said to be contemplating whether to take the company private or sell his roughly 20 percent stake. This is a circumstance where continuity and certainty are critical; a company has to protect its remaining talent pool.

Yet, giving 100 executives and managers $500,000 each for not abandoning ship, with no link whatsoever to performance goals, is a very big, red flag for investors. This is clearly not “Visionary Board” leadership we’re seeing from the Best Buy board. But maybe it’s a matter of survival.

It is interesting, in any event, to witness a company consultant standing on principle. By resigning the Best Buy gig, Don Delves may receive some of the best free publicity a compensation consultant could ever want in terms of having a reputation as an “independent” expert. Many compensation committees should be looking for just such a person as they struggle with ever-growing concerns about executive compensation practices.  So here is today’s bonus (pun intended) question:  A year from now, which will be higher: the number of new clients at Don Delves’ consulting firm, or the number of Best Buy managers who took the bonus and left the company anyway? I know which one I am hoping for.

If you liked this post, consider subscribing to Market Integrity Insights.


Image Credit: ©iStockphoto.com/Topp_Yimgrimm

About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

4 thoughts on “Best Buy or Worst Governance? Comp Consultant Bolts over Executive Bonuses”

  1. “By resigning the Best Buy gig, Don Delves may receive some of the best free publicity a compensation consultant could ever want in terms of having a reputation as an “independent” expert. Many compensation committees should be looking for just such a person as they struggle with ever-growing concerns about executive compensation practices.”

    I certainly hop you are right Matt. I could as easily work the other way but I think your guess is a good one. Thanks for bringing the action to our attention.

  2. Matt Orsagh, CFA, CIPM says:

    Thanks for your comment Jim. We will have to see how this plays out, especially with talk now of Best Buy going private.

  3. Rudy says:

    whoah this blog is excellent i love reading your posts.

    Keep up the good work! You realize, many individuals are searching round for this information, you can help them greatly.

  4. Matt Orsagh, CFA, CIPM says:

    Thank you for your kind words. And thank you for reading our blog. We will keep providing commentary on important corporate governance and capital market issues.

Your email address will not be published. Required fields are marked *



By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close