retail news in context, analysis with attitude

Two stories last week provided a comparison between two behemoths, Walmart and Amazon.

In the latter case, we found out that Jeff Bezos had total compensation last year of $1.68 million. He didn’t take a stock bonus - but let’s not cry for him, since his ownership stake in Amazon makes him the richest person on the planet, ever. His actual salary was $81,840 and he had $1.6 million in personal security costs that Amazon paid for.

Under a new federal requirement that public companies report the gap between what the CEO earns and the median pay for a rank-and-file employee - a requirement of which I fervently approve - Amazon also reported that median annual compensation in the company is $28,446. This includes part time employees, distribution center workers and those who work outside the US - and it works out, for a full-time employee working 52 weeks a year, to about $14 an hour.

Here’s the bottom line: Bezos ‘ annual compensation last year was 59 times that of the median Amazon worker.

That doesn’t sound all that great.

However, over at Walmart,

it was reported that CEO Doug McMillon got total compensation of $22.8 million - $15.7 million in stock awards, tied to the company's share price, a salary of $1.3 million and incentive pay of $4.7 million.

Median pay at Walmart was $19,177 - which means that McMillon brings in 1,118-times what the median Walmart worker does.

Now, in an op-ed piece for CNBC, Matthew Shay, CEO of the National Retail Federation (NRF), argues that this comparison is a misleading and bogus metric: “Does anyone really think comparing the paychecks of part-time teenagers in their first jobs to compensation of CEOs yields any useful insight about the management effectiveness or investment quality of retail companies? Or that it will generate effective policy ideas on how to put more Americans on a path to success?”

He also posits that the disclosure rule, while “purported to be a tool for shareholders,” actually is “a partisan tool aimed at stoking resentments in typical class warfare style.”
KC's View:
I understand why he feels that way - his organization is positioned as representing the needs and priorities of the people who own and run companies, not those of the people who work on the front lines.

I would feel differently if somehow the government got into the business of dictating how wide the gap could be, putting limits on CEO pay. That would be nonsense, and while some might suggest that some politicians might favor such a rule, it would be a non-starter at the legislative level.

In this case, it is just a way for me, as someone who could be interested in investing in one retailer or another - which I’m not - can take this metric into account if I want to. If I don’t want to, that’s fine.

For me, it is valuable because I hold the opinion that companies and corporate leaders ought to be more focused on front-line employees. Too many CEOs simultaneously try to drive down labor costs while negotiating bigger salaries for themselves, while ignoring the fact that sometimes a deficit in store-level personnel can have a negative impact on sales, profits and customer service. And they also rail against minimum wage increases and/or the notion of a living wage. Of course, they’re incentivized to think this way, which I think is a shame.

I’m tired of senior execs who aren’t getting the job done going to court and arguing that they should get incentive bonuses for hanging around and digging the company out of the hole they helped create. (Yes, I’m looking at you, Toys R Us.)

I’m not arguing that senior execs shouldn’t make the big bucks. I don’t know what pay equity means in any sort of absolute sense. And I’m not even sure what a “proper” spread between CEO pay and median salary should be - I think it depends on the business and the company. To paint with a broad brush is to ignore both reality and nuance.

But … I also think that while a rising tide is supposed to raise all boats, some boats are more fragile than others, some have leaks, and some of the folks in yachts not only don’t give a damn, but are being paid not to give a damn. In customer-facing businesses that depend on front line people who are engaged and focused and dedicated - which is what I think such companies need to have if they are going to be successful in a hardscrabble competitive environment - I think this can be a dangerous approach.