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.

Categories: News Update

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