Retail management may be well-paid, but on average their compensation falls slightly below what top executives earn in other sectors.
Still, the WWD list of Retail’s Top 25 Highest Paid Executives from U.S. publicly traded firms reveals that from a pay perspective, life in the C-suite can be sweet.
The top 25 included chief executive officers, chairmen, presidents, and executive vice presidents who collectively earned $347 million in 2014, with the top 10 earners bringing in nearly $200 million in total. Sixteen of the top 25 executives earned more than $10 million last year. Taking the top spot was Carol Meyrowitz, ceo of The TJX Cos. Inc. with $28.7 million in total 2014 compensation. Brian Cornell, chairman and ceo of Target Corp., took the number-two spot with a close $28.2 million. And L Brands Inc.’s Les Wexner was third with earnings of $24.1 million.
J.C. Penney Co. Inc.’s Marvin Ellison, president and ceo-designee, was next on the list with total compensation of $19.6 million while Wal-Mart’s Gregory Foran, executive vice president, took the number five position with $19.5 million. Pay amounts and titles were for the most recent fiscal year reported to the Securities and Exchange Commission.
On average, the top 25 retail executives earned $13.9 million, which is below the national average of $16.3 million as tallied by the Economic Policy Institute, which notes that since 1978 ceo pay has risen “997 percent, a rise almost double stock market growth.”
Executive pay packages vary between retailers, but generally include equity, base pay and a performance payout. On that last note, shareholder value is the key metric. “Today’s executives are being measured more by the value they create for the company’s owners than by simply getting the job done,” said Tyler Ridgeway, director of human capital resources at Kreischer Miller.
And as economic conditions shift, so do the performance metrics. In a recent report and corporate survey from Meridian Compensation Partners LLC, Jerrold Rosema, consultant at the firm, said 60 percent of companies polled have already “set their annual incentive performance goals higher in 2015 than in 2014, indicating increased expectations as the broader economy continues its recovery.” Given current conditions of overall apparel spending, some companies may even lower performance goals. Either way, though, performance incentives are often much larger than base salaries.
TJX for example, sets a $1.5 million base salary for Meyrowitz — and the rest of the ceo’s $28.7 million pay package is incentive- and equity-based. The retailer also has different performance metrics for each of its retail brands. According to the company’s proxy filing, the long-term cash incentives divisional weighting for Marmaxx is 68.5 percent with a cumulative, three-year performance target of $6.9 billion in adjusted net earnings. The company’s other three brands have weightings of 10.5 percent each. In other words, if the retailer meets the earnings goals over the three-year period, Meyrowitz and the executive team are awarded their incentives.
“Adjusted pre-tax income over a multiyear period was considered by the [executive compensation committee] to be an appropriate metric to use as a basis for plan targets to motivate and reward long-term performance, as it is a core business metric used across our company to plan long-term growth, manage our divisions and evaluate our long-term performance,” TJX said in its proxy statement adding that the divisional weightings and targets “were challenging, but reasonably achievable and that using the weighted combination of performance of our main divisions helps to promote our team-based approach to achieving our goals.”
Another important trend in executive pay includes “say on pay,” which requires companies to allow shareholders to vote on executive compensation. The requirement was passed under the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. Although there’s been little analysis on if or how “say on pay” exactly influences executive pay packages, one thing is clear: few companies fail to pass the measures. According to research from compensation consulting firm Semler Brossy Consulting Group, only about 3 percent of U.S. companies that had votes on “say on pay” failed to pass it.
Other noteworthy issues include the impact of mergers and acquisitions. At Men’s Wearhouse, for example, the compensation committee issued equity awards and a special bonus to executives in the fall of 2014 rather than during the normally scheduled “annual grant process in 2015,” the retailer noted in its proxy.
The company said the “accelerated issuance of equity awards and the special one-time cash bonus” to its top executives was done “in recognition of the outstanding efforts of senior management in connection with the successful conclusion of the Jos. A. Bank transaction.” As a result, Men’s Wearhouse ceo Douglas Ewert watched his total compensation package rise 167 percent.
Bottom line: Retail executive pay winners are those who deliver consistently strong profits as well as those who can navigate a successful merger. Increasing shareholder value is critical, and everything else is just chump change.