CEO Pay Falls at Big Three

MARK HAMSTRA

The chief executives at Kroger, Safeway and Supervalu all saw their performance-based compensation decline in 2008, according to filings with the Securities and Exchange Commission, reflecting weakened performance at those companies.

The declines followed strong gains in the preceding year in which many executives surpassed their goals, the filings indicated.

Steve Burd, chairman, president and CEO of Pleasanton, Calif.-based Safeway, led the Big Three in total compensation with $10.96 million. Although that total represented an increase from the year-ago figure, his incentive-based cash bonus fell by about 66%. He opted to forgo $200,000 of that bonus, reducing to just under $400,000 his incentive-based cash compensation, compared with about $1.79 million in the preceding year.

“Reduced bonuses are part of the trend and are running throughout all organizations and industries,” said Jose Tamez, managing partner of the Denver office of executive search firm Austin-Michael. “Aside from stock grants and other similar programs, performance incentives will not be met within most companies.”

Public companies overall reported that executive bonuses fell more than 50% in 2008, compared with 2007, Randy Ramirez, a New York-based compensation advisor with BDO Seidman, told SN.

In addition to Burd, Safeway's other top executives also saw their compensation decline in 2008, according to the company's proxy filing.

Although Safeway exceeded the minimum threshold of $1.53 billion in operating profit for the 2008 fiscal year to qualify executives for the operating bonus plan, the company did not meet identical-store sales goals of 2%, excluding fuel, to qualify for a larger bonus payment. Operating profit for the year was $1.85 billion, and non-fuel IDs came in at 0.8%.

Executives needed to achieve operating profit of $1.98 billion in order to qualify for 50% of their maximum bonus, which the company views as a target.

As a result, the compensation committee of the company's board of directors determined that Burd and the other Safeway executive officers would receive 10% of their maximum bonus. That compares with the 58% of the maximum bonus the company paid out for fiscal 2007.

Similarly, Cincinnati-based Kroger Co. said its executive team exceeded its 2008 bonus thresholds by 5%, although total compensation was down compared with the preceding year.

David Dillon, CEO of Kroger, received total compensation of $8.25 million in 2008, consisting of $1.2 million in base salary, 105% of a $1.5 million bonus target, stock valued at $5.3 million and other compensation totaling $170,000, the company's proxy statement said. Dillon in 2007 earned about $9.1 million after the company achieved 128% of bonus targets.

Kroger in 2008 awarded bonuses for a combination of identical-store sales and EBITDA growth as well as for performance against internal benchmarks for its strategic and capital projects. Kroger posted 4.9% ID-store sales growth for fiscal 2008, exceeding the 4% target, and EBITDA of $4.09 billion, beating the bonus benchmark of $4.07 billion.

Jeff Noddle, the outgoing CEO at Minneapolis-based Supervalu, also saw his compensation decline for the most recent year. In an SEC filing last week, the company reported that Noddle tallied $7.45 million for the year, down from $9.38 million in the preceding year and $11.9 million for the year before that. His compensation for the most recent period (which Supervalu defines as fiscal 2009) included $1.16 million in base salary, plus about $5 million in stock and option awards, and other compensation, but no incentive-based cash bonus at all. In fact, none of the company's top executives received such a bonus because net income did not meet the minimum set by the compensation committee. The company posted a loss of $2.86 billion.
Additional reporting by Jon Springer