The Institute for Policy Studies released a report on October 1 which was the first to provide a detailed analysis of the compensation three top Darden executives will walk away with after being urged to resign in the face of investor pressure.
The key finding: Darden CEO Clarence Otis, Jr. and two other top officials are leaving the embattled restaurant corporation with compensation valued at an estimated $68 million.
In defending the payouts, Darden spokesman Rich Jeffers told the Orlando Sentinel (Darden’s hometown newspaper) that the current value of executive stock awards in the report “shows the strong performance for Darden’s shares.” The Sentinel helpfully points out that Darden’s shares have increased 14.5 percent — since Otis announced his resignation on July 28. In other words, he’s benefiting from investor enthusiasm over his departure.
Jeffers also said in a statement: “The figures cited are hugely misleading and significantly overstate the actual severance. The vast majority of the figures cited as severance were actually earned compensation, including the value of already vested stock options and non-forfeitable retirement benefits, that the individuals earned over their entire careers at Darden — which spanned 20 years for Mr. Otis, 15 years for Mr. Madsen and 40 years for Mr. Pickens.”
In fact, the IPS report could not be more transparent. It provides extensive details of the various types of compensation the executives are walking away with, based on the company’s own reports. A table on page 2 clearly distinguishes between “cash severance” and other forms of compensation, including executive retirement funds.
In Appendix 2, the report provides even greater detail on the methodology for calculating the current value of equity-based compensation, with separate columns for option and stock awards that had vested as of the end of fiscal year 2014 and those that will vest before the end of the executives’ severance periods.
The aim of this report is to provide the clearest, most comprehensive picture possible of the fortunes these three executives are likely to put in their pockets after their resignations from Darden. Exact figures will depend on the value of Darden shares when the executives cash in their option and stock awards.
This full picture is important because it reveals the extreme disparity within a firm known for rock-bottom wages for low-level workers. There is a growing body of research indicating that such wide gaps not only violate basic principles of fairness but also undermine business effectiveness.
This is not the first time Darden has responded to IPS research with attempts to obfuscate. In September 2013, IPS Associate Fellow Scott Klinger penned an op-ed that ran in a dozen major newspapers regarding the company’s wage practices for restaurant servers. As Klinger explained in this blog, the op-ed calls attention to the federal subminimum wage for tipped workers, which has remained at $2.13 per hour for more than 20 years. Darden has been a leader in the National Restaurant Association’s efforts to defeat national legislation that would raise the tipped minimum wage.
Samir Gupte, the Senior Vice President for Culture at Darden, claimed the op-ed was full of errors and denied that any workers at Darden make $2.13 an hour. His aim was to confuse the issue by focusing on restaurant servers’ total earnings, including tips, when the op-ed clearly focused on what Darden actually pays these servers directly. In a September 25 article in Nation’s Restaurant News, Darden spokesman Rich Jeffers affirmed the IPS claim by revealing that 20 percent of Darden’s hourly workers receive $2.13 an hour, before tips.
Once again, Darden’s disinformation campaign will likely backfire, raising awareness among more consumers about the company’s unfair compensation practices.