BOISE, Idaho - Larry Johnston, chairman, president and chief executive officer of Albertsons here, will reportedly receive compensation of $52.6 million in cash and stock options if the sale of Albertsons goes through, as expected, later this year.
That total is significantly more than the reported $16.4 million he earned in 2005 and the $8.8 million he reportedly got in 2004 - due in part to a bonus he will receive for overseeing the sale of the company, industry sources said.
The terms of Johnston's salary and other perquisites is part of the employment contract he signed with Albertsons in 2001, they pointed out, noting that there is nothing particularly unusual about an executive receiving extra pay for selling a company.
"It's just business," Jose Tamez, an executive recruiter with Austin-Michael LP, Dallas, told SN, "although it appears to lack any precedent in the supermarket industry. And while some shareholders may be upset, it's not an uncommon practice for a CEO to be brought in and to receive some sort of incentive on top of the value of the stock he owns if he oversees a sale of the company."
That kind of incentive is more likely to be included when an executive is hired to run a troubled company "as an enticement to take on that kind of challenge, rather than being hired to run a flourishing business," Tamez said.
Part of what makes the payment to Johnston unique in the industry, he added, is the fact that he was hired away from a top-level post at General Electric and came into the Albertsons job with high expectations, despite his lack of supermarket experience.
Andrew Wolf, analyst, BB&T Capital Markets, Richmond, Va., said the board is at fault. "I blame the board for allowing a clause in the contract that is not as shareholder friendly as it should have been," he told SN.