Last week, Redfin real estate CEO Glenn Kelman announced that the company was laying off 8% of its employees in an email, saying that demand for the company’s realtor services had fallen 17% below expectations. May.
“We do not have enough work for dealers and support staff, and fewer sales leave us with less money for headquarters projects,” Kelman wrote in an email announcing the June 14 layoffs.
The redundancies at Redfin and another real estate company, CompassOn the same day, it came as the entire industry entered a cooling-off period last month, with rising mortgage rates pulling potential home buyers off the market.
But in an unfortunate development, the layoffs were announced on the same day that Redfin shareholders approved compensation packages for 2021 for four of the company’s top executives, including bonuses.
An SEC statement reveals that Redfin CFO Chris Nielsen received $ 2.3 million in basic pay, stock options and a $ 160,000 bonus. Real estate chairman Adam Weiner brought in a total of $ 2.7 million, of which $ 122,600 was a bonus. and CTO Bridget Frey won a total of $ 2.2 million, including $ 160,000 in bonuses. Former chief people officer Ee Lyn Khoo – who left the company in January 2022 – brought in $ 3.2 million in compensation, with $ 141,200 coming from bonuses.
The SEC deposit stipulates that compensation packages are paid “mainly through equity and not cash”, which is linked to performance-based incentives. “[Executives] “will make significant parts of their compensation only if our company performs at a high level,” the statement said.
That the vote on executive compensation took place on the same day as the layoffs was announced was “accidental,” said Alina Ptaszynski, director of corporate communications at Redfin. Luckadding that shareholders had been informed of the repayment details months earlier.
“The way shareholders’ annual meetings work is that they are often scheduled months in advance,” Ptaszynski said. “Proxies for which shareholders vote are also notified to shareholders months in advance.”
Ptaszynski said that the details of the compensation package were given to the shareholders in “April or May” of this year and that the packages “are not really related to the redundancies”. He added that the meeting was scheduled for June 14, so that the Redfin financial team would have enough time to calculate the bonuses based on the company’s performance in 2021.
Ptaszynski said a compensation committee had been discussing executive compensation and bonuses since April and that the process and timetable were “typical” for listed companies.
“This is the way the process has always worked,” he added. “So there was nothing different in this process this year either.”
Dismissals and executive bonuses
Redfin is not the first company to announce executive bonuses while firing employees. Large payments to executives in times of financial hardship, mass layoffs and uncertainty about a company’s future are not illegal or unusual.
In 2005, Congress barred companies from paying large retention bonuses to executives while they were in the process of filing for Chapter 11 bankruptcy, a practice that the late Democratic Sen. Ted Kennedy said ». statement accompanying the bill.
But while the decision prevented companies from making large payments to executives when they filed for bankruptcy, it did not prevent bonuses from being distributed in less difficult times.
Companies usually issue large payments to executives in times of financial hardship. This practice became particularly popular in the early days of the pandemic, when global lockdowns and market turmoil led to one of the largest waves of layoffs in U.S. history.
In March 2020, AT&T shareholders approved a $ 32 million compensation for then-CEO Randall Stephenson, a 10% increase from 2019, despite the company laying off 20,000 employees in 2019 and about 3,300 in the first quarter of 2020. and in May. In 2020, the car rental company Hertz approved a retention bonus of $ 16 million for executives, days before the bankruptcy application and just one month after the dismissal of 10,000 employees.
While a cooler real estate market is by no means a sign that Redfin is preparing to go bankrupt, the company’s layoffs are a signal that Redfin’s rapid growth in recent years may also be chilling.
This story was originally featured on Fortune.com