Poor Move at Talbots

I've noticed Talbots (NYSE: TLB  ) stock often seems to have some pretty adamant fans among Foolish readers. However, there may be one less reason for loyalty.

Talbots has had to cut workers and benefits as it struggles to keep the ship afloat in the dire economy. (And of course, Talbots' business struggled even before the economy went south.) However, despite all the sacrifices employees have had to make, Talbots CEO Trudy Sullivan will receive $1.2 million to offset recent reductions in her retirement benefits. Granted, this was part of her 2007 employment agreement, but somehow I doubt this kind of thing goes over well with a workforce that’s been beset by layoffs and benefit reductions as the company tries to save money.

Despite Talbots' long struggles, Sullivan is fairly generously compensated in the first place. In 2008, she made in total $5.7 million, with a base salary of $1 million. Last year, her base salary was $500,000, but she received a $1 million bonus, and total compensation came to a grand total of $6.9 million.

Granted, whether a CEO is "overpaid" can be a pretty subjective opinion. Many companies use "peer groups" to help determine pay, and Talbots' peer group includes some similar companies (Chico's (NYSE: CHS  ) , Coldwater Creek (Nasdaq: CWTR  ) , Ann Taylor (NYSE: ANN  ) ) as well as some you could argue are rather dissimilar in terms of size or product (Tiffany (NYSE: TIF  ) , Macy's (NYSE: M  ) ). Peer groups can definitely subvert the idea of pay for performance, instead hoping investors focus on competitive compensation practices in the marketplace.

Many of us would rather see more emphasis on pay for performance, though, and the fact that Talbots has been seriously struggling for ages is enough to make one wonder about millions in pay and perks for its chief executive officer, including this latest perk. Plus, we're talking about longtime malaise in its business; a glance at its five-year chart illustrates the ugly tale.

In these painful times, it would be nice to see more corporate executives make sacrifices similar to the ones their employees are forced to make; I may be picking on Talbots, but I also picked on Starbucks (Nasdaq: SBUX  ) , a stock I own, for similar reasons. There's always a point where corporate boards and managements can ponder doing the right thing. Furthermore, shareholders should wonder why companies with dwindling profitability (or in Talbots' case, no annual profitability for years running) continue to richly compensate executives for jobs not so well done.

Starbucks is a Motley Fool Stock Advisor pick and a Motley Fool Inside Value selection. The Fool owns shares of Starbucks. Try any of our Foolish newsletters today, free for 30 days.

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


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  • Report this Comment On June 24, 2009, at 8:29 AM, ladyfinger wrote:

    Well at least you are not picking on J Jill this time.

  • Report this Comment On June 24, 2009, at 11:29 AM, changeagent007 wrote:

    The shameful thing about Talbots is that the company embarked in organizational transformation led by a handful of autocratic washed up industry retreads from Liz Claiborne, Ann Taylor and the GAP - none of which have any recent relevant successful experience leading change.

    What can we say about leadership of a company that appoints half a dozen C level executives and then still has to take strategic advice from consulting firms like KSA and Bain,at the tune of a few million dollars a year.

    We all know that consulting firms employ top MBAs with little if any experience actually ever doing anything - who present with supreme arrogance, but unfortunately only sound intelligent.

    Of course, now the money is spent - and more is committed to the long-term welfare of fearless leaders like of Ms. Sullivan.

    So, Talbots employees, prepare for the axe because Ms. Sullivan, Mr. Smaldone, Mr. Scarpa, Mr. Poole, Mr. Fisk and a few of their buddies need more cash

    and have no ethical qualms about taking it from you.

  • Report this Comment On June 25, 2009, at 10:41 AM, vmb63 wrote:

    HAving been one of the employees cut in order for Ms. Sullivan to obtain her 'bonus' I have to agree with this article....Since l ast June, Talbots has cut well over 700 positions from their workforce with more likely on the horizon...But apparently that's OK as long as Trudy gets her cash.......Anyone with real value and integrity would forgo the bonus.....

  • Report this Comment On June 25, 2009, at 4:59 PM, liv4 wrote:

    Also as a former associate recently laid. They should be very ashamed of themselves.

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