Reaping the Benefits: Wal-Mart’s H. Lee Scott Retail’s Highest Earner

Performance-based bonuses catalyzed compensation among the top retail executives in 2003, with the usually frugal Wal-Mart leading the charge.

NEW YORK — Performance-based bonuses catalyzed compensation among the nation’s top retail executives in 2003 and leading the charge was none other than the usually frugal Wal-Mart Stores.

Despite the company’s shunning of almost all forms of corporate excess — the espousal of a sort of corporate Puritanism if you will — Wal-Mart president and chief executive officer H. Lee Scott topped the retail compensation list. Scott’s salary, including bonus, increased 25.3 percent $5.4 million in 2003, compared with $4.3 million in 2002. The compensation of Scott and two of his Wal-Mart colleagues should be no surprise — it is, after all, the world’s largest retailer. However, it couldn’t come at a more sensitive time as the retail behemoth has been besieged by everything from the federal courts to presidential candidate Sen. John Kerry, claiming its low wages and employment practices are bringing down the quality of jobs in America.

A Wal-Mart spokeswoman pointed out that Scott’s compensation pales in comparison to the remuneration of ceo’s on the Fortune 500 list. For example, Colgate-Palmolive Co. ceo Reuben Mark took home $141 million in 2003, largely by exercising stock options.

“Overall, people who know retail and know the company, know the challenges our executives have,” she added. “They know what it takes to attract and retain top talent.”

In fact, according to the spokeswoman, Wal-Mart last month introduced a new job reclassification and pay structure for hourly associates in stores and clubs. “We did that so we can maintain quality associates in a competitive market,” she explained, declining to provide details. “Many associates received an increase and nobody received a decrease.”

In response to mounting criticism of the company’s hiring practices and several class-action lawsuits — including the largest gender-discrimination lawsuit against a U.S. company to date, potentially encompassing 1.6 million current and former female Wal-Mart employees — Scott at the company’s annual meeting pledged to hire the same percentage of women and minority applicants who apply for positions, “provided an equal number of qualified applicants apply.”

Starting this year, executive bonuses will be tied to diversity goals. Scott will be penalized 7.5 percent of his bonus this year if his goals are not met and up to 15 percent in 2005. “The company is putting its money where its mouth is,” the Wal-Mart spokeswoman said. She declined to discuss specifics of the initiative, saying only “there are goals they are being asked to meet.”
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