How Wal-Mart Determines Pay

by Mark Friedman  on Monday, Oct. 15, 2012 12:00 am  

In Wal-Mart Store Inc.’s most recent proxy statement, the Bentonville retailer agreed that it didn’t have many equals.

“Our company is the world’s largest retailer by a wide margin and has significantly more extensive international operations than most publicly traded U.S.-based retailers,” the filing said.

As a result, the compensation, nominating and governance committee of the board of directors looked at three peer groups to determine how CEO Mike Duke’s pay compares with others.

The committee said it used the peer group data to ensure “compensation was set at an appropriately competitive level consistent with our emphasis on performance-based compensation.”

For one of the three peer groups, the committee used 23 retailers with annual revenue of more than $10 billion. It also picked 29 companies in the Fortune 100 that aren’t retailers but that have a similar global operation, business model and size. On that list are Intel Corp. of Santa Clara, Calif., and Ford Motor Co. of Detroit. And it reviewed the top 50 companies based on market capitalization.

Duke’s compensation was in the top quartile for CEOs in the retail survey, but his compensation fell between the 50th and 75th percentiles of CEOs in the Fortune 100 and the top 50 companies, the proxy filing said.

Another Arkansas retailer also checks out what its competitors are paying their CEOs. Dillard’s Inc. of Little Rock said in its proxy filing, however, that its compensation committee doesn’t “benchmark our compensation against companies in the comparison group.”

The Dillard’s committee does look at what executives in that peer group are making to “assess our competitiveness.” The amount that peer executives are paid helps set the pay for Dillard’s executives, the filing said.

Dillard’s compensation committee found 20 companies that were department stores, specialty stores or other public companies that were “family-founded and continue to be family-managed.”

Dillard’s was founded by the late William Dillard in 1938. The company’s executive managers include a number who are related to Dillard.

Some of the companies that Dillard’s committee looked to compare pay are the Gap Inc. of San Francisco, Tiffany & Co. of New York and Starbucks Corp. of Seattle.




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