Of course, when a new CEO accepts a large signing bonus, companies and shareholders alike expect results. In the past couple years, shareholders and experts in executive compensation have begun to question whether golden hellos are good policy. In some situations, offering these bonuses can hurt a company. For example, in 2011, J.C. Penney lured Ron Johnson from Apple with a $52.7 million signing bonus. Just 17 months later, after J.C. Penney’s stock dropped nearly 50 percent, the company fired Johnson. Some suggest that J.C. Penney’s experience with Johnson proves that large signing bonuses are bad for companies and bad for investors.
There are, however, cases where a large signing bonus has proven to be a good investment. Best Buy, for example, recently hired Hubert Joly as CEO in 2012 and paid him a bonus of approximately $13 million. Since Joly was hired, the price of Best Buy’s stock has nearly doubled. Currently, it appears that paying Joly a large, up-front bonus was a good move by Best Buy’s compensation committee.
If you are an executive currently considering making a move to a new company, consider speaking to an experienced executive compensation attorney. An experienced attorney can provide essential guidance in the negotiation of compensation and benefits packages and can help ensure that your short- and long-term interests are protected. For more information, contact an attorney today.