Some eyebrows have been raised after a decision by the Talbots Inc. board to pay chief executive Trudy Sullivan $1.2 million (six payments of $200,000 over a six-month period) to compensate her for a cut in retirement benefits. Ms. Sullivan saw her earning power take a hit after the company froze its pension and executive retirement plans in a cost-cutting move.
According to a Boston Business Journal report, Talbots' board said it approved the payment because it was "required to provide a substantially comparable benefit" due to recent changes that had affected Ms. Sullivan's pension and supplemental executive retirement plan.
Talbots, like many other retailers, has struggled during the recession and has taken a number of steps to improve its position including cutting 695 jobs (325 in the past two weeks), freezing benefits, closing underperforming locations and finding a buyer for its J. Jill chain earlier this month.
Ms. Sullivan, who earned a base salary of $1 million in 2008 also received $4.7 million from stock sales and additional compensation, according to a Boston Globe report.
Discussion Question: Will the decision by Talbots to pay Trudy Sullivan $1.2 million to compensate for lost retirement benefits create a credibility issue for the CEO with rank and file workers at the company?