No Separation Anxiety at Starbucks

These days, many U.S. workers can't help fearing the reaper. But for higher-ranking executives, parting ways with an employer may be markedly less traumatizing. Starbucks (Nasdaq: SBUX  ) provided the latest example of how walking out the door can actually be very lucrative for corporations' top brass.

It's no news that Starbucks is cutting costs. Its plans include layoffs and some store closures. Somehow, I doubt that baristas will receive the kind of sweet deal former Starbucks Coffee International President James Alling is getting as part of his "separation agreement." Alling will receive a lump-sum payment equal to an entire year's salary; last year, his base salary was $600,000.

Alling will also take home the equivalent of the cost of health-care coverage for one year. Anybody who's ever been laid off knows that monthly COBRA payments can sap one's limited financial resources really quickly. How nice it must be to get reimbursed for all of that stuff.

It sounds like a familiar story, though, and I'd be naive to suspect that it's uncommon among departing executives. At the end of July, I ran across an 8-K filing revealing that Abercrombie & Fitch's (NYSE: ANF  ) former CFO, who, significantly, was resigning from the retailer for a new job elsewhere, also received 12 months of base salary and some added perks to boot.

Executive "separations" of many types -- be they resignations, firings, retirements, or what have you -- seem to be running rampant these days. Recent examples include Charlotte Russe (Nasdaq: CHIC  ) , Hot Topic (Nasdaq: HOTT  ) , and American Eagle Outfitters (NYSE: AEO  ) , all of which have lost major members of their top brass. I also just ran across word that Jamba Juice (Nasdaq: JMBA  ) has lost both its CEO and its CFO, and the company's chairman is heading up the company on an interim basis.

In some cases, perhaps the companies in question will eventually do better with better cost efficiency or new blood in the top ranks. However, I can't say shareholders are particularly lucky when their companies experience executive flux and pay out lucrative packages. After all, many of these companies had already fallen on financial hard times.

Like controversy over runaway CEO compensation and pay-for-failure routines, I think policies like these deserve serious scrutiny, if not outright reform. In too many cases, rank-and-file workers and shareholders end up paying too high a price.

Starbucks is a Motley Fool Inside Value pick. Starbucks and American Eagle Outfitters are Motley Fool Stock Advisor selections. The Fool owns shares of Starbucks and American Eagle Outfitters. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.


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