Outgoing CEO's Favorite Toy? The Golden Parachute.

Toys R Us shareholders approved a $6.6 billion buyout by an investment group.

Since joining the Toys R Us as CEO in 2000, John H, Eyler has seen the beleaguered company steadily losing market share to discounters such as Wal-Mart. Eyler's annual total compensation is approximately $2 million, split evenly between cash and bonus.

So what happens to a CEO that runs a company into the ground? He gets rewarded with a golden parachute of course.

Eyler is due $65 million from the sale, making him the largest individual beneficiary of the expected payouts to senior executives. The remaining officers and directors of Toys R Us Inc. are expected to receive a total of $187 million.

According to the proxy filing, Toys R Us Vice Chairman Richard L. Markee could collect $1.7 million and Chief Operating Officer Christopher K. Kay and Executive Vice President John Barbour each stand to receive $1.4 million.

With government regulators focused on investigating corporate fraud, why not start with the obvious and curtail golden parachutes? The beneficiaries are the same individuals that propose and approve the amounts. With the specter of monetary fines and extensive jail sentences, senior executives don't need to commit fraud. They can enrich themselves at the expense of shareholders by running the company into the ground before selling it to investment groups that recognize the value of the assets. I would expect the Sarbanes-Oxley Act be amended in the future to limit these golden parachutes.


© 2005 Nelson Chin.
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