Target CEO’s ‘golden handshake’ should not be condemned

This week, social media went berserk when it was reported that Target CEO Gregg Steinhafel would be receiving a “walk-away” package worth $61 million. What ostensibly bothered everyone was the fact that this package is worth pretty much the same as the total severance and benefits the more than 17,000 Target Canada employees will be receiving over the course of the next 16 weeks.

Last week, the company announced that it would be shutting down its more than 100 stores in Canada after just two years of maintaining operations in the Great White North. There were a wide variety of reasons why Target Canada failed: customer dissatisfaction, a paucity of products and taking the Canadian marketplace for granted.

Target fired Steinhafel last year over the massive data breach that affected 110 million customers’ credit card data and personal information. Apparently, Steinhafel didn’t feel inclined to enhance corporate security, which is potentially why he was dismissed.

Investor activists were able to lower Steinhafel’s package to $61 million, but this didn’t please those on Twitter as many aired their grievances over this “unfair” package.

Disgraceful e.g of capitalism gone haywire. Firm folds, CEO bags $56 mill. & cons say ‘why we seen as party of rich?’ http://t.co/jXjbibMlsj

— odysseanproject (@odysseanproject) January 23, 2015

Next time you hear a politician say that “we can’t afford” to keep open a school or build new social housing, think of Target CEO’s pay.

— Luke Savage (@LukewSavage) January 21, 2015

The key question is: why do you care?

It’s a private company and is very different from a public, taxpayer-owned entity where the executives and employees’ wages should be placed under scrutiny by the citizenry and elected officials. Target paying its CEO $61 million has nothing to do with us whatsoever.

It should be remembered that this decision was entirely made by the board of directors prior to firing him. In other words, they knew what they were paying for when Steinhafel entered the company so it’s not as if it was an arbitrary number on his final day of work.

Indeed, this type of corporate decision happens all the time in big companies. Both sides agree to terms prior to executing the tasks of the job and if the company isn’t performing as planned then the board votes to either staying the course or letting the executive go. When that executive in question exits the job then that contract is also carried out.

A lot of CEOs make the decision to forego a salary and take shares in the corporation. This means that the CEO’s performance will affect his own pay.

There are a lot of reasons why the company may want to pay someone that amount of money. It could be that Target’s board of directors saw a lot of value in Steinhafel and didn’t want a competitor or another company to snatch his talents away. It could be that Steinhafel had an incredible plan to boost sales so the board wanted to take a gamble.

Finally, the general public usually cries out that CEOs shouldn’t be paid that much. Who’s call is that exactly? Again, taxpayers are not footing the CEO’s salary. Also, CEOs have an array of duties to fulfil and must be astute in various fields, such as human resources, markets, sales, marketing, legal and so on. It’s a lot different than just checking out a customer and scanning their $4.99 pack of batteries.

It could simply be a matter of jealous and envy, which is surprising because these very same critics will often lambast material wealth.

Here’s one solution: start your own business, pay all of the entry-level employees a higher salary than the owner or executive and see how that turns out.