business news in context, analysis with attitude

Reactions to yesterday’s story about executive compensation, and their seeming lack of connection with the events that shape and sometimes ruin businesses.

MNB user Tom Kroupa wrote:

“I find the double standard that corporations place in their compensation policies too much to take anymore! The little guys have to perform so they can support their boss' bottom line. Else they get fired, or demoted or transferred. But what happens when the bosses don't perform? It seems that they get bonuses anyway. Or they fudge the books to appear that they have performed. At any rate, who wants to work for a company whose management has no integrity? This is a serious issue that companies like McDonalds and Kmart refuse to acknowledge.”

And another member of the MNB community wrote:

“Odd confluence of stories today, Kevin. I suggest you pair the story of executive compensation with the one about the cell-phone activated refrigerator - microwave and do a piece called: " much is my time worth?" In other words, I suspect only an over-compensated CEO-type will think the $2,000 price tag on the "Refrig-O-Wave" would be justified.

“How many minutes would this thing save an average person? Let's work it out...under the old method, a person gets home, takes a leftover platter from the 'fridge, pops it in the microwave for 5 minutes (total 5 1/2 minutes with the fridge hunting part) and then sits down to eat. Under the "Refrig-O Wave" method, the person calls the machine from 5 minutes away from home, enters the house and eats (no time for the pipe and slippers, dear....I "phone cooked" dinner!).

“So for $2,000, you can 'save' 5 1/2 minutes every day. If you're making $25 an hour (a decent executive salary, or 41 cents per minute), your 'phone cooking' will save you $2.25. so after 888 'phone-cooked' meals, the machine will have paid for itself! However, if you're Jim Adamson (Salary and bonus - $961 an hour/$16 per minute), the thing will pay for itself in about 22 days...”

Boy, you just sucked all the fun out of an appliance that we thought was kinda cool…

We got several emails responding to our piece about Martin L. Grass, the former chairman and CEO of Rite Aid Corp., who will pay $1.45 million to settle a shareholders’ lawsuit charging that the retailer’s books were falsified in order to inflate the company’s stock value. Grass still faces criminal charges in the matter, but his attorney says that a civil settlement doesn’t mean that Grass is admitting any culpability, guilt or responsibility in the matter.

MNB user Lawrence Anderson asked:

“What's up with Rite-Aid stock? Their sales and profit reports have been
good, after the corporate housecleaning. I bought stock after the Fred Meyer/Kroger team moved in. Rite-Aid cleans up their act, their sales reports turn around, accounting practices are clear, and the stock is in the stagnate $2's. How come?”

You’re making the faulty assumption that stock price should be related to factual -- as opposed to fictional -- performance.

More email about a possible Sears-Kmart merger, from MNB user
Robert Sgarlata:

“Combining Sears and Kmart equals, shall we say, Sears-Mart? ... could prove to be an interesting proposition ... if it had been brought forward about 20 years ago!

“Some thoughts: Even though there are meaningful demographic differences in their customer bases, both Sears and Kmart enjoy a unique relationship with a solid core of loyal customers. Do these demographic differences present too great of a challenge? Consider today's national drug chains. They exist in a retail format driven by a convenient location strategy vs. a demographic strategy. The national drug chains cater to an extraordinary diverse range of demographic groups that are far more diverse than the differences between Sears' and Kmart customers.

“Sears has long been saddled with less attractive mall locations - many of which they cannot exit. Yet they possess some of America's favorite brands such as Kenmore, Craftsman and Die-Hard to name a few.

“Kmart on the other hand still holds quite a few quality retail locations – most which would be enhanced with the availability of Sears' famous brands. Kmart also possess a powerful brand (at least until the Jury deliberates) in Martha Stewart, that would play nicely in a Sears' environment.

“Of course, along with these brands, Sears-Mart would still require a significant infusion of marketing (= strategy), retail management (=execution) and technology (= efficiency and knowledge) -- none of which Sears or Kmart may be capable of providing to address a combination of these two former retail giants.

“The bottom line: Today's competition is just too efficient, the big boxes have Sears and Kmart surrounded and consumer expectations are too great and their patience too short.

“Nonetheless, I cannot help but find consideration and strategies for a 'Sears-Mart' to be extraordinarily interesting.”

Yesterday we ran a piece about Sainsbury’s Market at Bluebird, prompting the following email from an MNB user in the UK:

“I haven't seen this shop since Sainsbury's took it over but it has been there - full of enticing, tantalising and delicious looking and tasting if expensive foods and delicacies, many Bluebird own label and many cooked in the on-site kitchen by a team of chefs hired specifically for that purpose - since Bluebird opened a number of years ago. It will be interesting to see (a) how much the products have changed now that it has the Sainsbury's name, (b) why they have done it and (c) how much change there is in the trading figures. But there may be more to the story than is apparent just by announcing that Sainsbury's are testing a new concept shop...”

Regarding speculation about why Wegmans hasn’t come to Connecticut yet, which some attribute to not wanting to compete with Stew Leonard’s, MNB user Ken Robb wrote:

“Taking considerable license and paraphrasing the well-known comment...I know Wegmans, having lived in upstate New York for two years...Danny Wegman is a friend of mine and many in our industry...and having also lived in nearby Westchester County, and with great and well deserved respect for what they have done in Fairfield County, I must say that Stew Leonard's is no Wegmans.”

Different stores, different experiences, different customers. We’d shop both.

And regarding Nash Finch’s announcement that it will open a 41,000 sq. ft. Avanza Supermarket in Chicago, the first of several such Hispanic-oriented units that the company plans to open there, one MNB user wrote:

“There are many Hispanic stores in the area that are RUN by Hispanics, I've got to wonder IF, they will go to a store that is run by outsiders. Even if Hispanic products are sold at the larger grocery chains, most Hispanics prefer to shop at their own FAVORITE HISPANIC STORE. There are many already in the area, and it looks like Nash Finch is going to make the same mistake that Safeway did, come into Chicago and expect customers to come in droves because of THEIR NAME!”

And finally, we got the following encouraging email from an MNB user:

“Kevin…I appreciate the fact that you don't seem to pull any punches when it comes to pointing out corporate malfeasance (Let‚s Make A Deal: Execs‚ Compensation Rise Above The Morass). It would be easy to be a kiss-ass and try to make friends with the industry.

“Stay on top of the slotting and trade funds issues. They are the cocaine to this industry, and the patient either has to go into rehab, or they're going to die. And take others down with them.

“If retailers became merchants instead of spending so much time muscling suppliers I believe they would find it easier to compete with the guy(s) who is/are making it being a world class distributor and merchant.”

And on that note…have a good weekend.
KC's View: