STORES Magazine - January 2008 - (Page C11)

The Hand of the Market CEO COMPANY TOTAL COMPENSATION % CHANGE LAST FISCAL YEAR NET INCOME GROWTH LAST FISCAL YEAR TSR R. Lawrence Montgomery Lew Frankfort Steven Burd Myron Ullman Ralph Lauren CEO Kohl’s Coach Safeway JCPenney Polo Ralph Lauren COMPANY 156.13% 139.06 98.19 118.35 25.88 TOTAL COMPENSATION % CHANGE 31.67% 34.27 55.16 5.97 30.16 LAST FISCAL YEAR NET INCOME GROWTH 59.28% 58.49 46.91 46.40 45.77 LAST FISCAL YEAR TSR Jeffrey Rein John Mackey Bradbury Anderson Jeffrey Bezos Margaret Whitman Walgreen Whole Foods Market Best Buy Amazon.com eBay 6.94% 42.99 45.17 8.46 407.60 16.61% 49.41 20.79 -47.08 4.03 -8.99% -10.73 -13.17 -16.31 -30.43 Study Methodology At some point, the ability of the CEO to affect his or her company’s fortunes simply dissipates, and nothing in this study better illustrates that than total stockholder return (TSR). If TSR were a measure of executive performance, then Larry Montgomery, Lew Frankfort, Steve Burd, Myron Ullman and Ralph Lauren are great CEOs and Jeff Rein, John Mackey, Brad Anderson, Jeff Bezos and Meg Whitman are – something else. Fortunately for the latter group, it isn’t. If you look at the performance figures for these two groups (and screen out Amazon, which for purposes of this discussion is something of a statistical distraction), you find only one major difference. The average swing between the 52-week high and low stock prices for the leading five is nearly 71 percent; the average 52-week fluctuation for the bottom five is less than 40 percent. That, more than anything else, drives the difference, and —as any market-battered executive will attest — it happens for a whole host of reasons, most of them beyond the control of the C-suite. Charts: Reuters Fundamentals stock was selling at a price-to-earnings ratio of 281 – meaning it is being valued for reasons not very closely related to its actual performance. (If Wal-Mart had that kind of P/E ratio, its stock would be selling at $868.50 and it would have a market cap in excess of $3 trillion.) Presumably aware of all this, the eBay board nevertheless awarded CEO Meg Whitman a compensation increase of 408 percent. It’s interesting to examine the retail CEOs whose names are at the bottom of the list. Dead last is Jim Sinegal of Costco, something that comes as no surprise to anyone who closely follows this industry. Sinegal has no problem with earning a fraction of what most other Fortune 500 chief executives receive – perhaps because he owns more than $150 million in company stock. What’s ahead for CEO pay in 2008? Increases may be a fait accompli, but additional scrutiny by shareholders and others with a say in corporate governance may be, as well. “With the market not performing well, 2008 is widely expected to be a difficult year,” Kaul says. “CEO compensation is going to receive more scrutiny from investors and boards of directors. There’s certainly going to be more resistance to increases, and we may very well see some reductions.” StORES Peter Johnston is a New York City-based writer and editor active in a number of industries. Information about his capabilities and services is available at www.foxhoundenterprises.com. WWW.STORES.ORG The Retail CEO Pay chart is a derivative of an expanded research project produced for the Financial Times by Reuters Fundamentals. In order to be included, retail companies had to appear in the S&P 500 index and have had the same CEO and filed annual reports for the past two years. In all, 33 retail companies appear on the list. The companies operate across multiple channels and sell a variety of goods. Compensation figures are derived from company proxy statements and include the most recent fiscal year and the prior fiscal year figures, understanding that most — but not all — retail companies begin the fiscal year in February. Total compensation includes salary, bonus and other compensation, plus longterm compensation. CEOs are ranked by total compensation figures for the most recent fiscal year. All calculations are based on total compensation and compiled by Reuters Fundamentals. STORES / JANUARY 2008 C7 http://Amazon.com http://www.foxhoundenterprises.com http://www.foxhoundenterprises.com http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of STORES Magazine - January 2008

STORES Magazine - January 2008 Contents Executive Editor's Page President's Page Build a 'Bot Sneak Peek at Fashion Trends What Shoppers Think 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Cover Story: Fishing for Talent Retail CEO Compensation Research Concept2Watch E-Commerce Payment Solutions Online Merchandising POS LPInformation LP Vantage Point Newsbeat Industry Watch Cover Story: Making LP PCI-Compliant Mall Security Video Surveillance Industry Perspective Forum RFID Business Intelligence Data Management Logistics Turning Green into Gold Love of – and for – the Outdoors Loeb Retail Letter ARTS Update Point of View NRF News Retail Industry Calendar Last Laugh

STORES Magazine - January 2008

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