Sample Business Studies Paper on Executive Compensation at Walmart

Executive Compensation at Walmart

Executive pay is a significant factor in human resource management. It is important to properly compensate executives because it motivates them to act in the interest of shareholders. Remuneration for the top most executives differs from compensation for other workers in Walmart and other organizations. Executive pay covers senior individuals that include Vice Presidents, Chief Financial Officer, Chief Executive Officer, Chief Technology Officer, and other senior managers. Typically, executive pay is influenced by two objectives. First, tying organizational performance over a certain period to the pay offered to executive. Second, ensuring that pay packages offered to executives remain competitive with those provided by competitors to their senior managers. Therefore, the attractive compensation packages offered to senior executives at Walmart play a major role in enhancing the motivation and dedication of the management team to increase the organization’s success.

The basis of Walmart’s executive compensation plan is that senior executive ought to be rewarded when shareholder value and company’s profitability grow over a certain period. Due to the fact that senior managers are usually in high tax brackets, the company prefers providing their compensation in a manner that offers significant savings in tax. For that reason, the total compensation packages of these individuals may be more significant than the salary. Particularly when the base pay exceeds 1 million dollars, executives are often more concerned about components of the total package, including deferred and current remuneration. Thereby, Walmart ensures that its leaders are sufficiently compensation as a way of keeping them motivated to drive business growth and create shareholder value.

Executive compensation for senior managers and  typical pay packages offered to other workers are different  in that the former is based on the organization’s performance. Therefore, if a corporation underperforms, its senior managers receive only a tiny part of their potential remuneration. However, if the enterprise attains its annual targets and its share price increases over the long term, the executives are likely to receive a large payout. Senior executives in a company like Walmart are offered pay packages that consist of components such as base salary, contingent payments, executive perquisites, benefits, long-term incentives based on performance, and performance-based annual bonuses. The Structure of executive pay is meant to reward impressive business performance and align the executive compensation with creation of shareholder value. Hence, if senior executives and Walmart perform well, the individuals tend to get much higher pay due to superior company results.

Forms of Executive Compensation

The forms of executive pay offered to executives at Walmart include cash compensation, option grants, deferred compensation, long-term incentive plans, retirement packages, and executive perks. Table 1 provides an overview of executive compensation at Walmart for the 2020 fiscal year and Table 2 shows the compensation for the members of Walmart’s board of directors for 2020 fiscal year.

  • Executive perks: The various compensation packages offered to top managers at Walmart include travel reimbursements and tickets for private jets. The perks offered to executives are subjected to scrutiny to prevent abuse. The perquisites are vital in tying talented managers to the enterprise and in demonstrating that the company values them. The non-cash items allow executives to be viewed as VIPs within and outside the corporation. Moreover, the perks offer significant tax savings since the internal revenue service does not tax them as income.
  • Retirement packages: These are compensation packages available to senior managers who retire from Walmart. Typically, these packages may include health benefits and as well as pension.
  • Long-term incentive plans: These packages encompass compensation based on performance. The current tax laws in the United States favor compensation-for-performance pay. Performance-based incentives are formulated to tie executive pay to the sustainable success of the business. This compensation should result in growth-oriented decisions that are needed for the enterprise to do well over the long term.
  • Bonus plans: Since it may not be easy to determine the performance of executives, bonus pay should be based on a meaningful performance measure. For instance, Walmart ties yearly bonuses for senior managers to the organization’s profitability. The bonuses can be as high as 35 percent of an individual’s base salary. Bonuses offered to senior executives may be determined in various ways. One of these is a system whereby the assessment of the board of directors and the Chief Executive Officer becomes the basis for awarding bonuses. However, this approach may be hindered by absence of measurable, formal targets. In addition, bonuses maybe linked to net profit before tax, earnings per share, return on investment, and other specific measures. Other complex systems may be used to compute bonuses. Importantly, it is vital to clarify the method used to determine bonuses so that executives understand what they are expected to accomplish to receive the bonuses.
  • Deferred compensation: This is the type of pay that is deferred until a future date. This postponement is usually done for tax purposes.
  • Option grants: A stock option provides an executive with the right to purchase stock in the organization at a discounted price. Stock options are typically used as performance-based incentives. When utilized appropriately stock options are effective in inspiring the organization’s management to act in the interest of shareholders and increase shareholder value.
  • Cash compensation: This includes all monetary pay offered to an executive. The organization usually lists the base salary for key individuals in the management team, including the Chief Executive Officer, Executive Vice Presidents, and Chief Financial Officer. The salaries of executives at Walmart vary by job position. On average, the base pay makes up approximately 40-60 percent of the yearly total compensation for the top executive. To increase the salary of executives, the approval of the board of directors may be required.
Title Name of Executive Equity Total Cash    Other     Total Executive Compensation
Global Chief Technology Officer Kumar Suresh USD 43,603,400 USD 2,273,700 USD 21,600 USD 45,898,700
Executive Vice President McLay Kathryn USD 11,887,200 USD 1,601,200 USD 17,900 USD 13,506,200
Executive Vice President McKenna Judith USD 7,323,600 USD 2,909,900 USD 290,800 USD 10,524,200
Executive Vice President Furner John USD 6,712,600 USD 2,703,100 USD 325,900 USD 9,741,600
Executive Vice President and CFO Biggs Brett USD 5,752,900 USD 2,491,100 USD 262,400 USD 8,506,400
President and CEO McMillon Douglas USD 15,710,000 USD 4,793,700 USD 410,100 USD 20,913,800

 

Table 1: Executive compensation at Walmart for the 2020 fiscal year (Walmart, 2020).

Name Total Compensation
Flynn Timothy USD 300,600
Horton Thomas USD 333,100
Reinemund Steven USD 302,200
Walton Steuart USD 295,100
Easterbrook Stephen USD 259,500
Friar Sarah USD 293,000
Walton Robson USD 275,000
Mayer Marissa USD 274,900
Penner Gregory USD 500,000
Conde  Cesar USD 317,900
Harris  Carla USD 275,900

 

Table 2: Compensation for the members of Walmart’s board of directors for 2020 fiscal year (Walmart, 2020)

Analysis of Walmart’s Executive Compensation

In a 2019 proxy filing with the Securities and Exchange Commission (SEC), Walmart indicated that the compensation for its senior executives exceeded USD 112.39 million. The most highly paid executive officer was Kumar Suresh who holds the position of Global Chief Technology Officer at the organization. Because the company’s annual performance was impressive, the top executive officers received large pay packages. The corporation’s revenue increased to 524 billion US dollars which was a 1.85 percent growth from 2018. However, the company recorded a lower operating income at 20.57 billion US dollars. Due to the decreased income, the top executives received a lower bonus than that they had been awarded in 2018 (Souza, 2020; U.S. Securities and Exchange Commission, 2019; Walmart, 2020).

The total income for Kumar Suresh was 45.9 million US dollars, which included stock awards valued at 43.6 million US dollars as an item of deferred compensation as well as a 515,100 US dollars signing bonus. The executive got a USD 576,900 base salary, US$1.81 million in cash incentives, and other compensation valued at US$21,600. His stock awards and sign-on bonus are what made him among the top six highest paid executives in the firm (Souza, 2020; U.S. Securities and Exchange Commission, 2019; Walmart, 2020).

The total compensation for McMillon Doug, Chief Executive Officer, was 22.100 million US dollars and an additional 135,000 US dollars in deferred salary. Since 2017, the CEO has constantly received 1.18 million US dollars as base salary. In 2019, he got 15.71 million US Dollars in stock awards, just as he had received since 2017. His total bonus pay for the 2020 fiscal year was 3.57 billion US dollars, which was a decrease from the bonus he had got in 2019 and 2018.  The basis of pay incentive is total organization performance of operating income and sales revenue growth. Though the company recorded a revenue increase in 2020, its operating income was less than for 2019 (Horowitz, 2018; Meyersohn, 2019). Due to decreased incentive pay, the CEO’s total compensation in 2020 reduced by approximately 5 percent from that he got in 2019 (Souza, 2020; U.S. Securities and Exchange Commission, 2019; Walmart, 2020).

The total compensation for Biggs Brett, the Chief Financial Officer, was 9.5 million US dollars. USD 675,000 of his pay was deferred. Biggs’ base salary increased by 2.5 percent to USD 915,400 from the amount he got in 2019. Just like in 2019, he received 5.8 million US dollars in total stock awards. The CFO got $1.6 million US dollars as bonus incentive pay which was a decrease from the 2.223 million US dollars he earned in 2019. He got USD 292,100 as pension deferred compensation which was slightly less than he received in 2019. Just like in 2019, he earned an additional USD 262,400 as other compensation (Souza, 2020; U.S. Securities and Exchange Commission, 2019; Walmart, 2020).

The total compensation for McKenna Judith, Executive Vice President, in the 2020 fiscal year was 12.21 million US dollars. This pay was slightly less than the 12.900 million US dollars she got in 2019 with the same responsibilities. She earned a 1.07 million US dollars base salary, a slight increase from the 1.04 million US dollars she received in 2019. Her stock awards and bonus pay were lower than in 2019. Her bonus performance pay was 1.8 million US dollars and stock awards were valued at 7.3 million US dollars. Moreover, she earned a 1.7 million US dollars in pension deferred compensation and USD 290,800 as other pay (Souza, 2020; U.S. Securities and Exchange Commission, 2019; Walmart, 2020).

McLay Kathryn, Executive Vice President,  got her current position in November 2019. Prior to that, she was in charge of Walmart’s Neighborhood Markets. Her total compensation for the 2020 fiscal year was 13.51 million US dollars. She earned a USD 640,400 base pay, a USD 960,900 performance bonus, and 7.3 million US dollars in stock awards. Furthermore, she got USD 2,480 as pro-rated pension deferred payment and USD 17,900 as other compensation. Her deferred salary was USD 12,500 (Souza, 2020; U.S. Securities and Exchange Commission, 2019; Walmart, 2020).

The total compensation of Furner John, Executive Vice President, was 9.92 million US dollars, which included USD 40,500 as deferred payment. In October 2019, Furner got the position of CEO of Walmart U.S. The USD 847,900 salary earned by Furner included his former responsibilities as Chief Executive Officer of Sam’s Club. He got USD 133,250 as pension income which was a USD 40,450 increase from what he received in 2019. Just like in 2019, he got USD 325,900 as additional income (Souza, 2020; U.S. Securities and Exchange Commission, 2019; Walmart, 2020).

How to Find Executive Pay

Information about executive compensation at Walmart can be found in the documents filed by the organization with the Securities and Exchange Commission. The company usually discloses the amount it pays members of its senior management team, how the compensation is determined, and who is involved in determining that amount. Some of the documents where the information is disclosed include S-1/S-3 Forms, Form 10-Q, Form 10-K,and Form 8-K. Current issues of S-1/S-3 Forms contain data about pay offered to senior members of the management team. This information is usually useful to future investors. Form 10-Q contains quarterly data about executive pay. Form 10-K contains annual information about executive pay. Current filings of Form 8-K reveal compensation information when there are changes in pay procedures and policies. Hence, there are various ways that may be used to get information about an organization’s executive pay.

Conclusion

Remuneration packages offered to the top most executives at Walmart differ from employee compensation both in benefits and scale. Stock options and a large base salary are an integral part of executive pay packages. However, an organization may decide to offer a low base pay and more advantageous stock options to minimize the tax burden. The issue of executive remuneration can be controversial considering that recently, packages offered to senior managers have significantly increased compared to compensation for average employees. Internally, when junior workers in an organization feel that incentives offered to be their managers far exceed the executive’s work input, employee productivity, loyalty, and dedication are likely to decrease. Externally, if a business is perceived to be unfair to workers, damaging to the environment, and making losses, the compensation packages offered to executives often become the focus of media attention and criticism. Thereby, it is important to ensure that Walmart’s executive compensation is consistently based on long-term growth and profitability of the business.

 

References

Horowitz, J. (2018, April 23). Walmart’s CEO earns 1,188 times as much as the company’s median worker. CNN Business. https://money.cnn.com/2018/04/23/news/companies/walmart-ceo-pay/index.html

Meyersohn, N. (2019, April 24). Walmart CEO Doug McMillon’s total pay was nearly $24 million last year. CNN Business. https://edition.cnn.com/2019/04/23/business/walmart-ceo-doug-mcmillon-pay-retail/index.html

Souza, K. (2020,April 24). Top six Walmart execs compensation a combined $112.39 million in 2019. TBP. https://talkbusiness.net/2020/04/top-six-walmart-execs-compensation-a-combined-112-39-million-in-2019/

U.S. Securities and Exchange Commission. (2019, June 5). Walmart: Notice of 2019 annual shareholders’ meeting. https://www.sec.gov/Archives/edgar/data/104169/000120677419001406/wmt3482341-def14a.htm

U.S. Securities and Exchange Commission. (2019, October 10). Form 8-K Walmart Inc. https://sec.report/Document/0000104169-19-000070/

Walmart. (2020, June 3). Walmart: Notice of 2020 annual shareholders’ meeting.  https://corporate.walmart.com/media-library/document/2020-walmart-proxy-statement/_proxyDocument?id=00000171-a3e6-de83-a7fd-f7eeef900000