Tuesday, 6 February 2018

CEOs sacked for conduct don't deserve severance pay

This blogger has been fascinated with lululemon for some time. The Vancouver based company has been peddling fashion wear for yoga and been successful at it. Firstly this blogger is amazed that you have fashion wear for yoga. Secondly, can a company really be named lululemon ? And spelt without a capital L ? There was also the business of yoga pants that, er, revealed too much, a few years ago. With that sort of pedigree, it is a "must follow" company !

(Wunder Under Hi-Rise 7/8 Tight Full-On Luxtreme 25" for $98.00 USD - Note the price !)

They are in the news again. They fired their CEO yesterday. The gobbledygook announcement they put out said "lululemon expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr. Potdevin fell short of these standards of conduct." In plain English, the Board fired him. He did something wrong, relating to employees, and they fired him. Plain and simple. Nothing earth shattering about that - CEOs are fired for a variety of reasons and this happens all the time. But clearly he was fired, not for poor performance, but for something he should not have done with employee(s), but did. We should not speculate further.

So far nothing spectacular. But what got my goat was also the statement in the announcement that "Potdevin will receive a cash payment of $5 million, including $3.35 million upfront and an additional $1.65m over the next 18 months, according to a separation agreement filed with the Securities and Exchange Commission." This is outrageous. He's guilty of misconduct and you pay him $5 million ? I'm gobsmacked. Yes, there must have been a separation payment in his employment contract. That's standard in almost all CEO contracts. Why CEOs - any employee's contract. You have to be paid a severance pay (however measly it may be) if you are fired.

But this guy is being fired for wrong conduct. Would any low level employee guilty of the same conduct as Mr Potdevin ever be paid a severance pay ? No chance ? Then why should he be paid simply because he was the CEO. If there was an iron clad clause in his contract that said he would be paid no matter what the reasons for firing are, then the guys who drafted such a contract must be fired and made to pay a fine equal to this severance pay.

This sort of action is why companies are hated by the general public. Any corporate action must not only be fair, but be seen to be fair. The Board of lululemon deserves to be fried , roasted and hauled over coals. It is a listed company. What are the shareholders doing ?

CEOs are exactly the same as any other employee of a company. I have no problem with them being paid handsomely for the work they do. But they should not be paid for conduct that necessitates a firing.


Sriram Khé said...

I tell ya, you are increasingly beginning to rant like me, against those darn fat-cats. Welcome to my world, my friend! ;)

Yep, there is nothing more for me to say ;)

Ramesh said...

@Sriram : I only rail when they do something stupid. I am far away from your world, my friend :)

Rads said...

Lol a few years ago i didn't know what lululemon was until i saw a lot of people including the yoga teachers wearing or rather flaunting them in yoga classes..i came home and googled "yoga pants with reverse ohm symbol" and lululemon popped up (initially i clicked every other link except lululemon thinking it cant be related to yoga..what a name they picked!) and then my eyes also popped out after seeing their prices..they do seem very comfortable and high quality and I agree that you need good yoga pants to hold all the "wobbly bits" (copied from bridget jones diary) in and something with good flexibility for several poses and stretches while also fitting you well without suffocating...but pricing them a 100euros per pant is ridiculous, no amount of comfort/quality can really cost so much to produce/market/sell..and it's not just lululemon but other brands like nike adidas etc., are the same maybe even more expensive ... Anyways, now we know how they can afford paying 5million to CEOs who get fired for bad conduct that too...
We should just stop buying and funding such things..but unfortunately yoga or sports clubs are a place for socializing and networking as much as they are for health/exercise and people want to look good and network with people of similar mentality (the ones who're willing to pay 100euros per pant) or maybe they just want to post a picture on instagram showing off how cool and fashionable they are embracing something exotic and all that social media crap.. and i don't think any of these people really care or read such articles or will even be willing to listen if someone like you or me tells them how these companies are cheating us and filling their undeserving CEOs pockets..people just want to believe what marketing shows them...everyone around seems to be getting shallower day by day if they are paying so much for yoga pants just to look fashionable..and greedy companies like lululemon are cashing it..

All this reminds me of an old documentary "Inside Job" but you must have already seen it...

Rads said...

Oh no! i didnt realize how lengthy that got..sorry :P

Deepa said...

I wonder if the employee(s) got compensated as handsomely. Its adding insult to the injury for them if they didn't.

Ramesh said...

@Rads - Hey - delighted at your detailed comment. That's actually a small comment; not lengthy :)

Have no problem with yoga sessions being "social" and wanting to look good, but really $100 for leggings ??? There must be some sanity to the process !

@Deepa - Possibly some money changed hands, but you can bet your last dollar that it was covered by an iron clad confidentiality agreement.

gils said...

well..they have their contract written iron clad. if similar kind of contracts are dealt with general group of employees companies will go bankrupt.its an obvious unfair accommodation that every company agrees accepts and adheres.

Ramesh said...

@Gils - That's why these arrangements are awful and must be banned. If something cannot be extended to every employee, why should it be allowed only for a CEO ?

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