Executive Bonuses Reflect Performance in 2011

Executive Bonuses Reflect Performance in 2011

Top executives at Delhaize Group [3] will forgo any pay increases this year and will voluntarily forgo half their bonuses following a weak financial performance in the recently ended fiscal year.

The move, announced in conjunction with the company’s annual meeting late last month [4], follows the announcement by Philip Clarke, the chief executive officer of Tesco [5], that he will forgo his bonus this year in the wake of deteriorating sales in the company’s core U.K. market, not to mention millions of dollars in losses at the company’s Fresh & Easy banner in the U.S.

“I decided at the beginning of the year that I would decline my annual bonus for 2012,” Clarke was quoted as saying in a Reuters report. “I wasn’t satisfied with the performance in the U.K., and I won’t take the bonus.”

Weak Economy Complicates Transition: Delhaize CEO [4]

For CEOs at the largest U.S.-based chains, however, compensation increased this year and reflected their companies’ attainment of financial targets, according to the latest filings with the Securities and Exchange Commission.

David DillonDavid Dillon [6] (right), chairman and CEO of Cincinnati-based Kroger Co. [7], was awarded $8.9 million in compensation, including a $2.7 million performance bonus and $1.7 million in stock options. (The $8.9 million total excludes about $3.1 million related to pension valuation that is listed as part of his official compensation in SEC filings, but that he does not actually receive this year.)

His pay increase for 2011 was about 65% over 2010 levels, driven largely by his performance bonus. Kroger had the best sales and profit growth of any of the “big three” traditional supermarket operators, with total sales up 10.2% for the year and net income rose about 10%, excluding a charge for consolidation of pension funds.

Despite Dillon’s big pay increase and Kroger’s relatively strong financial performance, his pay was still below the $9.6 million median compensation for CEOs of publicly traded companies, according to an analysis by the Associated Press. That median was up 6% over the preceding year.

Steve BurdSafeway [8] Chairman and CEO Steve Burd [9] (left) also saw his compensation increase slightly this year — to about $10 million, including $6.1 million in option awards. His performance bonus totaled $2.2 million, up from $750,000 a year ago. Performance bonuses for Pleasanton, Calif.-based Safeway executives were based on the company’s earning an operating profit of about $1.1 billion, vs. a threshold of $384 million; earnings per share of $1.71, vs. a target of $1.65; and same-store sales of 1%, which fell below the target of 1.5%.

Certain Safeway executives also receive bonuses based on returns on invested capital, which exceeded threshold levels.

Safeway is changing one component of its compensation structure in 2012, however, following a review by the compensation committee of the board of directors. While executives previously had the ability to choose among a mix of options and restricted stock in the long-term incentive plan, this year they will receive a mix of 50% stock options and 50% performance share awards, which are granted based on growth in earnings per share.

Craig HerkertAt Minneapolis-based Supervalu [10], CEO Craig Herkert [11] (right) received total compensation of about $3.8 million, including an incentive bonus of $364,395. The company’s earnings per share of $1.25 exceeded the threshold of $1.20, but same-store sales declines of 2.8% did not meet the meet the threshold of negative 2.5%.

Supervalu realigned its compensation in the recently ended fiscal year to be heavily weighted toward performance-based pay. Base salaries were only increased if the executive assumed additional responsibilities, and half of the annual bonus was paid in restricted stock rather than cash.

“Actual compensation realized by executives was below the target opportunity due to the financial results and stock price performance,” the company said in an SEC filing.