THE BIG WINNERS
Byline: Thomas J. Ryan
NEW YORK — In the world of designers and manufacturers, the talk about paychecks centers around Ralph, Tommy, Giorgio, Donna, Calvin, and often Linda. But in retailing, the big 1999 winners were Bob, Jim and Les.
Target Corp.’s chief executive officer, Robert J. Ulrich, topped the compensation listings last year, taking home $9.8 million versus $5.4 million in 1998. He was followed closely by Federated ceo James M. Zimmerman’s $8.5 million in total compensation.
Generally, retail ceo’s were well compensated in 1999 in what many saw as the fourth straight year of healthy performance for the U.S. retail market. The average paycheck for a group of 40 top executives was a sweet $2.55 million. And since retail stocks were in favor for most of last year, many were further remunerated by cashing in on stock options, a circumstance not likely to recur in 2000. However, due to an abundance of special stock awards in 1998, average compensation for the group dropped about 7.8 percent.
Ulrich’s earnings were bolstered by a rise in his bonus to $3.5 million from $2.3 million and a trebling of his long-term incentive payout to $4.8 million from $1.6 million. In a year in which Target’s earnings vaulted 54 percent, he also realized $4 million through the exercise of stock options.
Federated’s Zimmerman more than kept up with the cost of living with a hefty 163.5 percent pay raise, stemming principally from a restricted stock award of $4.2 million — he had none in 1998 — and an increase in annual bonus to just under $2 million from $922,000. He also realized $4.5 million from the exercise of options in 1999, when Federated’s profits were up 20.1 percent.
At The Limited, Leslie H. Wexner’s pay catapulted nearly as far as Zimmerman’s — 159.5 percent to $7.1 million. Adjusted for the spinoffs of Abercrombie & Fitch and Limited Too, the company’s earnings were up 40.1 percent, and the bonus moved to $3.3 million from $1.5 million, as he received a restricted stock award of $2.4 million.
Although they’re still far more likely to be the honorees, rather than the causes, at fund-raising dinners, a few retail ceo’s took home less, after disappointing 1999 campaigns.
Saks Inc.’s R. Brad Martin missed his first bonus since 1991, causing his total compensation to tumble 80.5 percent to $1.1 million. Saks missed earnings forecasts for 1999, partly due to underperformance at the Saks Fifth Avenue chain. At Nordstrom Inc., John Whitacre missed a bonus for the first time since 1996 after the Seattle-based retailer suffered its second straight year of same-store sales declines. Earnings shortfalls led to missed bonuses for the head honchos at Elder-Beerman, Goody’s Family Clothing and Stein Mart, and significantly shrunken bonuses for the ceo’s at Wet Seal, Neiman Marcus, Bebe, Syms, the Buckle and United Retail.
Overall, the $2.55 million average paycheck for the group of 40 execs was 7.8 percent below 1998’s $2.75 million, but the latter included a large number of special restricted stock payouts. Although each received higher bonuses last year, the ceo’s of Wal-Mart, May, Talbots, Ross Stores and Abercrombie & Fitch all saw their net compensation decline because of hefty restricted stock payouts in 1998.
Excluding those five retailers, average pay for the remaining 35 execs rose 9.7 percent to $2.5 million.
Besides Ulrich, Zimmerman and Wexner, 1999’s $4-million-plus club included Gap’s Millard Drexler ($7.8 million), Ames’s Joseph R. Ettore ($7.8 million), Wal-Mart’s David D. Glass ($4.5 million), Sears’s Arthur C. Martinez ($4.1 million), and Abercrombie & Fitch’s Michael S. Jeffries ($4.0 million).
Drexler received $7.8 million, up from $6.8 million in 1998. He also realized $6.54 million from exercising stock options. Ettore’s overall compensation expanded to $7.8 million from $6.8 million, and he realized $4.5 million from exercising stock options. Martinez’s annual bonus grew to $2.2 million from $980,088, lifting his net pay 73.1 percent to $4.1 million.
At Wal-Mart, Glass, who this January stepped down as president and chief executive to become chairman, was paid $4.5 million in 2000, with his annual bonus growing to $2.5 million from $2.4 million. His compensation of $7.1 million in 1998 included $3 million in restricted stock awards. He realized $5.7 million in 1999 from exercising stock options. His successor, H. Lee Scott Jr., earned $2.1 million last year, plus $3.4 million by exercising stock options.
Jeffries’ overall compensation fell 32.9 percent to $4.04 million due to a reduction in the amount of his restricted stock award to $1.1 million from $3.7 million. His bonus grew to $1.7 million from $1.4 million.
TJX Companies’ Bernard Cammarata, who resigned as ceo in April of this year but remains chairman, saw his bonus slide to $1.2 million from $2.4 million, causing overall pay to drop 22.5 percent to $3.8 million. But he realized $6 million from exercising stock options. He was succeeded by Edmond J. English, who was paid $1.44 million last year.
Kmart’s Floyd Hall’s pay was scaled back to $3.6 million from $5 million, largely because the year-ago period included $1.63 million in restricted stock awards. His bonus for 1999 was $1.3 million, slightly down from $1.4 million the prior year. Chuck Conaway, formerly of CVS, succeeded him as Kmart ceo in June.
Huge windfalls went to many of the operators of specialty stores, which outpaced much of the industry in 1999. Rewarded for returning Charming Shoppes, the owner of Fashion Bug, to profitability, Dorrit J. Bern saw her annual bonus rise to $900,000 from $508,563, and received a $1 million restricted stock award versus no such award in 1998. Bern’s pay package reached $3.1 million.
At Ann Taylor, J. Patrick Spainhour’s compensation surged 78.1 percent to $2.98 million as his bonus shot up to $1.3 million from $942,500 and he was rewarded $829,688 in restricted stock awards versus none the prior year.
At Pacific Sunwear, Greg H. Weaver saw his annual bonus rise to $840,000 from $600,000, received a $1.2 million restricted stock award against none in 1998, and realized $1.7 million by exercising stock options. The surf-oriented apparel chain’s profits sprang upward 50.2 percent in 1999.
Braun’s William J. Prange saw his bonus jump to $727,829 from $171,133. Hot Topic’s Orval D. Madden’s annual bonus jumped to $574,000 from $150,000; and he realized $1.5 million from exercising stock options. At American Eagle, George Kolber’s annual bonus mushroomed to $753,925 from $275,000, and he realized $2.9 million from exercising options.
Talbot’s Arnold B. Zetcher’s overall compensation slid 25.2 percent to $1.83 million because the year-ago period included $873,348 in restricted stock awards. His bonus in 1999 grew to $972,000 from $814,800 in 1998, and he realized $1.1 million in 1999 from converting stock options.
On the downside, Burton M. Tansky’s compensation dropped 11.1 percent to $1.38 million as his bonus shrunk to $220,000 from $470,000 a year ago. Neiman Marcus Group’s earnings slid 12.1 percent in its year ended July 31, 1999.
Wet Seal’s Kathy Bronstein saw her bonus drop to $834,470 from $1,477,097 as the junior chain’s earnings skidded 45.4 percent last year. However, she realized $1.98 million from exercising stock options.
The Buckle’s Dennis H. Nelson saw his bonus drop to $776,250 from $1,598,300, and his restricted stock awards payout shrank to $77,619 from $479,490. But he also realized $1.3 million by cashing in on stock options. Bebe’s Manny Mashouf’s bonus was slashed to $150,000 from $1.65 million, while, at United Retail, Raphael Benaroya’s bonus was chopped to $195,000 from $660,000. Benaroya realized $1.2 million in restricted stock awards.
Kohl’s R. Lawrence Montgomery’s overall compensation advanced 38.1 percent to $1 million as his promotion to ceo in February 1999 lifted his base salary to $750,000 from $522,504. His annual bonus grew to $247,500 from $176,550. Montgomery also realized $1.5 million from exercising stock options. Kohl’s former ceo, William S. Kellogg, who remains chairman, earned $1.6 million last year, and garnered $37.1 million from exercising options.
The combination of bigger salary and bonus lifted John M. Belk’s compensation 21.1 percent to $1.3 million.
May’s Eugene S. Kahn’s compensation shrank 68.3 percent to $2.5 million, but that largely reflected $5.3 million in restricted stock awards in 1998. His annual bonus increased to $787,500 from $675,000, while his long-term incentive payout dipped to $446,653 from $584,408.
Similar to Kahn, Ross Stores’ Michael Balmuth’s compensation tumbled 79.1 percent to $1.5 million, but his 1998 pay included $6 million in restricted stock awards. His annual bonus in 1999 grew to $721,111 from $650,000.
J.C. Penney’s James Oesterreicher received no payment under Penney’s EVA (Economic Value Added) Performance Plan and his bonus reserve account was credited with an amount equal to negative $1.1 million. Overall compensation for Oesterreicher, who announced in May that he plans to retire as soon as a successor is found, grew slightly to $1.1 million from $965,183.
The highest paid Penney’s executive was Vanessa Castagna, chief operating officer and executive vice president of Penney’s stores, merchandising and catalog divisions. She earned $3.2 million, including an $800,000 signing bonus and $1.93 million in restricted stock awards. Castagna, who joined the firm from Wal-Mart last August, is often mentioned as a top contender for Penney’s ceo slot.