Gamestop Corp (GME.N) CEO George Sherman could step down this summer with a $ 179 million windfall that eclipses CEO salaries at much larger companies thanks to a sweetheart deal sparked by the furious meme stock rally this year, compensation experts said.
GameStop said on Monday that Sherman would step down on July 31. The struggling US video game retailer is looking for a new leader to work on its ecommerce transition with Chairman Ryan Cohen, the billionaire co-founder and former CEO of online pet supplies. retailer Chewy Inc (CHWY.N).
GameStop decoupled some of Sherman’s salary from his performance in the early months of the COVID-19 pandemic last year, granting him stock when the stock was worth a fraction of their current value, according to a Reuters review of security filings and interviews with compensation consultants.
As a condition of his departure, GameStop speeds up the time frame for Sherman to receive the stock, generating the reward.
Sherman, who has been CEO since April 2019, forfeited $ 98 million in shares this month for failing to meet performance targets, GameStop announced last week.
Still, he’s about to receive a share payout that is currently worth $ 179 million because GameStop has awarded him more shares related to his tenure with the company rather than his performance, as most companies do with their CEO, said Eric Hoffmann, a vice president at compensation counselor Farient. Advisors LLC.
“Investors like performance-based awards that have hard, predetermined financial goals that executives must achieve to earn, as opposed to time-based stocks, which they just have to wait to get them,” said Hoffmann .
A GameStop spokesperson from 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 pay is higher than the annual salaries given to many top American CEOs. ViacomCBS Inc (VIAC.O) CEO Joseph Ianniello took home $ 112.9 million in realized wages in 2019, while JPMorgan Chase & Co’s (JPM.N) Jamie Dimon realized $ 107.8 million in 2019, according to the most recent count by corporate governance data provider CGLytics.
Other GameStop employees will not share in Sherman’s windfall. According to securities disclosures, the retailer has closed hundreds of stores.
GameStop’s stock closed at $ 158.53 on Tuesday, a stratospheric rise from about $ 5 last summer as the company grants most of the stock award to Sherman. They skyrocketed in January when individual traders on Reddit and other social media platforms picked them up and pressured short sellers.
Reuters reported last year how some companies were protecting executives from the financial impact of the pandemic by switching from performance-based to time-based payouts. They reasoned that the market disruption made it difficult to meet financial targets, and Sherman will capitalize on that trend.
Sherman, 59, has been internally credited with cutting costs and driving GameStop through the pandemic that put other retailers out of business, Reuters reported last week.
But his 25 years of experience was largely with brick-and-mortar retailers such as Advance Auto Parts Inc (AAP.N) and Home Depot Inc (HD.N). Cohen wants a top executive with skills better suited to GameStop’s digital transformation, Reuters reported.
ESTABLISHMENT OF SHARES
GameStop awarded Sherman approximately 925,000 shares last June that he would receive in threes in three years, according to regulatory authorities.
He will receive them all at once upon his departure under the terms of a “transitional agreement” negotiated this month, as well as approximately 200,000 additional shares not yet vested, the filings show. The registrations do not reveal how the GameStop board decided on these rewards.
Sherman also rose to eventually receive 308,477 shares awarded in June last year related to his performance, regardless of the share he forfeited last week. He agreed to forgo those performance-based stocks as well, according to one of the filings. It was not clear 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 position.
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