While the exact details of Gregg Steinhafel’s exit package have yet to be disclosed, regulatory filings indicate that the former Target Corporation CEO will likely walk away with millions of dollars.
Target’s board revealed Monday that Steinhafel has stepped down, and the company appointed Chief Financial Officer John Mulligan as interim president and CEO as it searches for a permanent replacement. In a Monday filing with the U.S. Securities and Exchange Commission, Target said Steinhafel will “remain employed by Target in an advisory capacity to assist with the transition.”
The filing indicated that Steinhafel is entitled to severance payments under Target’s “income continuance plan,” on the condition that he agrees to a “non-solicitation” clause and a “release of claims.” Severance payments, as well as stock, could be taken back if Steinhafel goes to work for certain competitors, the filing states.
“The board of directors has not made a final determination on other compensation-related aspects of Mr. Steinhafel’s departure, if any,” and Target will make another filing to describe “any additional compensation elements related to his transition,” the company said.
In other words, the final details of Steinhafel’s package have yet to be disclosed. But earlier regulatory filings shed some light on the subject.
The 2013 Proxy Statement
Target’s annual proxy filings detail its compensation packages for Steinhafel and other company leaders. While Target has yet to file this year’s annual proxy statement, last year’s filing shows Steinhafel’s salary was $1.5 million, and his total compensation exceeded $20.6 million, when accounting for stock awards and other non-salary income, for the fiscal year that ended in February 2013.
The proxy statement also includes a section titled “potential payments upon termination or change in control,” which estimates how much money Steinhafel would have received under the theoretical scenario that he exited the company in February 2013.
The proxy statement references Target’s “income continuance plan”—the plan that was also mentioned in Monday’s filing about Steinhafel’s departure. The proxy statement indicates that such payments are awarded to executive officers who are “involuntarily terminated without cause to provide continued income to assist in their occupational transitions.”
Target didn’t specify in Monday’s announcement whether Steinhafel’s exit was voluntary; it said only that its board and Steinhafel agreed that “a leadership change is in Target’s best interests” and, accordingly, Steinhafel “stepped down” from his CEO role and “resigned” from the board. A Target spokesperson on Monday declined to share any details beyond what appeared in the company's brief regulatory filing.
But under the theoretical scenario that Steihafel was fired in February 2013, he would’ve received roughly $11 million under the “income continuance policy.”
The proxy statement also suggests that Steihafel, under that theoretical scenario, would’ve received $6.3 million in restricted stock units and roughly $9.3 million under Target’s “officer deferred compensation plan” (ODCP)—a program that was closed to new participants in 1996 but applies to Steinhafel, who joined Target in 1979 and was appointed CEO in 2008. It appears from the filing that Steinhafel would’ve only been eligible for the ODCP component, if he exited the company voluntarily.
Estimating The Total Value
While the proxy statement gives some insight into the potential size of Steinhafel's so-called “golden parachute,” it’s leading various media outlets to draw varying conclusions.
The Star Tribune, for example, said Steinhafel’s eligible for about $26 million. The Minneapolis newspaper arrived at its estimate by adding the $11 million from the income continuance policy, $9.3 million from the ODCP, and $6.3 million from vesting of stock, based on the 2013 proxy statement. The newspaper also pointed out that Target's proxy statement is overdue, although the company is not yet out of compliance with securities industry rules. The delay may be an indication that Target has been negotiating a severance package for Steinhafel, the newspaper reported.
Business Insider, meanwhile, said that Steinhafel's exit appears voluntary—and assuming that to be the case, Steinhafel would likely be entitled to the $9.3 million ODCP package.
And USA Today, also citing the 2013 proxy statement, projected that Steinhafel could actually collect more than $55 million, when accounting for salary and incentive pay, pension benefits, and deferred compensation.
More details are expected to be released when Target files its next proxy statement. But the company appears to have a history of large severance payments: In 2008, the company paid outgoing CEO Robert Ulrich $164 million, according to a Forbes report.