Peloton offered Barry McCarthy $168 million to become CEO

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Peloton offered Barry McCarthy $168 million to come out of retirement and become chief executive, an amount hard to calculate for the fitness company, which is 2,299 times the average employee’s salary.

Peloton revealed the numbers in proxy submission it also said on Tuesday that co-founder and former chief executive John Foley cashed in $97 million worth of stock in the 12 months to June 2022, while five other top executives sold stock worth a total of $88 million.

The disclosure of previous share sales by top executives was the catalyst for the launch of Blackwells Capital activist campaign earlier this year, leading to Foley’s departure. Blackwells claimed the company was “viciously mismanaged” and said insiders had enriched themselves by selling more than $700 million in stock since the company’s initial public offering in late 2019.

Pelaton also disclosed that it now prohibits executives from pledging stock as collateral after Foley faced margin calls — demands to put up additional collateral — from Goldman Sachs when the share price fell last year. It previously allowed executives to pledge up to 40 percent of their shares as collateral.

Foley pledged more than 6.7 million of his shares, nearly double the 3.5 million he announced a year ago, “as collateral to secure certain personal indebtedness,” Foley said in a statement.

Foley resigned as chief executive in February and relinquished the chairmanship last month, but filings show he still owns 40.6 percent of the super-voting shares and 33.8 percent of the “total votes.”

The disclosure comes weeks after the group cut 500 jobs in its fourth restructuring this year as McCarthy tries to regain momentum with a leaner business model.

On paper, McCarthy’s package would make him one of the highest-paid executives in the U.S., although the filings said that “almost all of that amount reflects Mr. McCarthy’s new equity grant” — stock options later. All of his 8 million options are now underwater as Peloton’s equity value has fallen by four-fifths since his appointment.

Peloton’s CEO-to-median pay ratio is 2,299 to one, compared to the S&P 500 average of 324 to one, according to the 2021 Paywatch report from the AFL-CIO, the union federation. The company said the median employee salary was $73,117; it has about 5,000 employees.

Peloton said it believes in “risk-taking” and variable pay for its executives to align their interests with long-term business value. It said they sought to “ensure that each employee’s pay appropriately reflects the level of job exposure and responsibilities and is competitive within our peer group.”

Peloton also said that McCarthy will not give any additional awards for four years.

McCarthy, the former CFO of both Netflix and Spotify, took over after Peloton’s market value collapsed from nearly $50 billion to less than $8 billion as losses mounted and it became clear that the hypergrowth he experienced at the start of the pandemic Covid-19 was temporary — not the “new normal” that would drive Peloton’s value to $1 trillion, as Foley predicted.

The quick turnaround for Peloton proved difficult. The group continues to post losses, and Wall Street has largely lost faith in the company, whose market value has fallen to $2.5 billion despite McCarthy’s cost-cutting and sales partnerships with Amazon and Dick’s Sporting Goods.

The filing also revealed that Peloton gave other top executives large bonuses to “motivate and retain our employees,” even though some of the executives were fired or left this year. Jill Woodworth, the former CFO, received a total salary of $13.4 million in fiscal 2022, while new CFO Liz Coddington received nearly $8 million.

Peloton has designated certain “Together We Go Far” awards as equity grants. It’s an oft-used phrase at the company, sometimes bandied around and described as “one of the core values ​​that drives our strategy.”

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