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.

Harold Reiter, president and ceo of executive search firm Herbert Mines Associates, said that even for a company like Wal-Mart that prides itself on being lean and mean, Scott’s rising salary may be an indication of things to come.

“I think Wal-Mart has gone through an evolution just like every other company,” said Reiter. “They know they have to pay for performance.”

Reiter even compared the situation to Wal-Mart’s relationship with its vendors. “If you want to sell to Wal-Mart you’re going to have to do what the Wal-Mart market says you have to do, which is lower your price,” he said. “It’s the same thing with employees. If they want to hire certain people they’re going to have to do what the market demands.”

Scott’s compensation is far from excessive in relation to his retail peers. He helms a company that generated revenues of $256.33 billion in 2003. In comparison, the second-highest compensated executive, Target’s Robert Ulrich, received a salary, including bonus, of $4.9 million in 2003, while the company had sales of $48.16 billion.

And while Wal-Mart had three executives in the top 20, Federated Department Stores saw five of its executives make the list. Each of the Federated executives who made the list saw their total salaries increase by more than 55 percent from the previous year, even though corporate earnings fell 15.3 percent to $693 million from $818 million.

According to the company’s proxy statements, the salary spike was in large part due to “retention payments” awarded to vice chairs Susan Kronick, Thomas Cole and Janet Grove in August 2000 and not paid out until 2003.

Out of the top 20 highest-paid executives of publicly listed retailers, based on salary and bonus, only two saw their compensation decline during the year. In fact, the average salary among the top 20 executives expanded 31.3 percent to $3.2 million. In comparison, the average in 2002 was $2.4 million. The median salary among the executives grew more markedly, rising 43.4 percent to $2.7 million from $1.9 million.

Experiencing the biggest increase was Gap Inc. ceo Paul Pressler, who saw his salary jump 224.1 percent to $4.6 million, due to an employment agreement that guaranteed him a bonus of $1.9 million in 2003 on top of a performance-based bonus. Pressler has no guaranteed bonus after 2003.
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