Time Inc., publisher of Time, People, Sports Illustrated, as well as Fortune, on Tuesday announced that CEO Joe Ripp is stepping down.
Ripp will be replaced by EVP Rich Battista, who in addition to serving as CEO will assume the role of company president and join the board of directors. Ripp, who joined Time Warner in late 2013 to lead the magazine division through its mid-2014 spin-out into an independent company, will remain on Time Inc.’s board of directors as executive chairman at least through its next annual shareholder meeting—most likely in June 2017.
The idea of a management shakeup at Time Inc. (TIME) isn’t terribly surprising. The company’s stock price has sunk around 34% since being spun-off in June 2014. Annual revenue has steadily declined and losses have grown. Moreover, activist investor Jana Partners recently acquired nearly a 5% equity stake without publicly revealing its intentions. A spokesperson for Jana Partners did not reply to a request for comment.
But what may be perplexing for shareholders is how Time Inc. will compensate its former CEO on the way out: $5.2 million.
Ripp in his new role will continue to receive his $1.13 million base salary through most of 2018. He also will receive a minimum annual bonus of $1.42 million during that time period (again, pro rated for 2018), according to a regulatory filing. And he will continue to vest outstanding equity awards.
Or, put more bluntly, Ripp is being paid at least $5.2 million, or around $221,000 a month, for what largely may become a part-time advisory gig—remember, he can leave the board next summer. Time Inc. has not said whether it will continue to reimburse Ripp for a co-pilot on his personal aircraft (the company has said in the past the co-pilot is necessary for “safety concerns”). Alan Johnson, a top compensation consultant, said that Ripp’s exit package looks like a “negotiated severance” to him, but it isn’t unreasonable. “Five million dollars in the realm of executive exit packages these days is quite reasonable,” says Johnson.
Ripp’s contract does require that he be paid two years of severance with the same base salary and annual bonus structure. Those payments, though, only were supposed to kick into effect if he was terminated without cause or resigned due to a material breach by the company. Neither provision seem to apply in this case, as Ripp told Time Inc. employees on Tuesday that this was a voluntary decision based on an undisclosed “heart-issue” and his desire to, among other things, no longer work CEO-type hours.
Nonetheless, Ripp will continue, at least for the next two years to lend his “knowledge, leadership, and experience” to Time Inc.
A company spokeswoman declined comment.