Target CEO Steinhafel Gets Millions For His Voluntary Departure, But Would Have Received More Had He Been Fired

Most of us would rather quit our jobs than be fired. But what if, by quitting, you gave up millions of dollars?

Target (NYSE:TGT) President and CEO Gregg Steinhafel is departing in what the company said Monday is a mutual agreement in the wake of a massive data breach of customers’ credit and debit card information, as well as the company's fumbling expansion into the Canadian market.

The 59-year-old retail executive isn’t leaving the Minneapolis general merchandise chain empty handed. But under the terms of his contract, Steinhafel is receiving less compensation for departing voluntarily than he would have received in a severance package had he been forced out by the company’s board of directors. The difference isn’t small. A voluntary termination gives Steinhafel more than $9 million in deferred compensation in addition to income guarantees for the next two years. Had the separation been involuntary, he would have received more than $17 million in severance and stock.

So why didn’t he force the board to push him out?

“There’s probably more there that we don’t know,” said Kevin Mullaney, president of The Grayson Company, a New York City-based retail industry consultancy. “It’s probably the best deal he would have gotten. He took the blame and responsibility. ... If you look at Gregg’s tenure, Target’s revenues increased, but the net incomes have stagnated.”

Revenue has increase 11 percent to $74.8 billion between fiscal years 2010 and 2014, while net income has fallen nearly 12 percent to $2.19 billion in the same period of time.

Mullaney says it’s difficult to tell whether Steinhafel is departing mainly because of the massive data breach in December that the company said may have affected “millions of customer credit and debit card records,” or because of Target’s $941 million losses last year in its Canadian expansion.

But whatever the reason for his departure, the man who started at Target in 1979 as a merchandising trainee in Milwaukee, Wisconsin, and became the CEO in 2008, has done pretty well. He collected $64.3 million in total compensation between 2010 and 2014, according to the company’s latest compensation-related regulatory filings. That’s above the nearly $7 million he accumulated in base salary and bonuses in that same period of time. The rest comes in stock-based compensation, options and other incentives.

Steinhafel is the last executive who was part of a deferred compensation package the company phased out in 1998. Under this so-called Officer Deferred Compensation Package, Steinhafel was set to receive $9.3 million as of April 2013, according to the latest compensation-related regulatory filing. Had Steinhafel been involuntarily terminated, he would have received a severance package worth $11 million (as of April 2013) under Target’s executive income continuance policy, which would have been paid out monthly for the next 12 to 24 months. He would have also received an additional $6.3 million in restricted stock awards and options.

Last month, Target replaced Chief Information Officer Beth Jacob, who emphasized customer experience, with Bob DeRodes, a former technology adviser for the U.S. Department of Homeland Security, as the company begins to rebuild confidence among its customers in its IT operations.

Since Steinhafel has been at the helm of Target, the company’s stock price has gained 13.6 percent and its shareholders have received five increases to dividends payments, from 16 cents per share to 43 cents. The last time the company skipped a quarterly payment to shareholders was in the second quarter of 2006.

Target sales floor personnel and cashiers make about $8.30 an hour, according to the jobs website Glassdoor. The average sales floor manager makes about $14.50 an hour while senior team leaders earn around $17.45.