business news in context, analysis with attitude

Yesterday, we reported how a week after Supervalu suspended its dividend and said it was considering a sale, its board of directors gave stock options and retention bonuses to top executives.

To say the least, I was outraged by this. You can read my rant here , in case you missed it and are interested.

Got a lot of email about this. Exactly one person thought I was off-base:

Those SV "bonus" are stock options.  The stock's value must rise to pay anybody a reward.  How could being motivated to increase SV stock value be wrong?

I get your point. But these execs already have stock and options, and I think that under the circumstances, those should have been enough to get them to stay and do their jobs.

Here are some of the rest of the emails.

One MNB user wrote:

Not surprised to hear of the retention bonuses at Supervalu.  I thought that might happen when they announced their earnings and search for 'strategic alternatives' a few weeks ago.  It's a shame what has happened to what was a fine company.  Being one of the 800 who lost their jobs in March I experienced the downward spiral and it is a relief to no longer be there.

The Leadership Development and Complesation Committee has also approved a $75,000 increase in base salary for Mr. Herkert for Fiscal 13.  Although this is his first pay increase since he was hired three years ago it is still 8.8%.  Additionally, it appears that lower levels of performance were needed in F'12 vs. F'11 in EPS and Cash Flow to receive incentive pay.  This resulted in a non-equity incentive plan compensation of $364,395 for Mr. Herkert in Fiscal 12 and a total of $660,882 for the other four named executive officers - Ms. Smith, Ms. Haugarth, Mr. Van Helden (who has left the company) and Mr. Herring.  There was no non-equity incentive plan compensation in Fiscal 2011.

Eight directors were of the board in both 2007 and 2012.  On average these eight directors have increased their cash compensation by 83% and their total compensation by 37% in these 5 years.  In the same time $100 invested in Supervalu in February 23, 2007 with dividend reinvestment was worth 20.90 in February 24, 2012 (when the stock closed at $6.65, not the $2.21 it is trading at today).  This compares with a peer group figure of $124.69 for $100 invested for the same time period.

And just a few years ago Supervalu was saying they are "focused on creating a company that is the best place to work, best place to shop and the best place to invest in our industry".

From one reader:

This email is a first....I have never written to any publication to comment on an article, but your comments on Supervalu finally drove me to it.  All I can say about your comments is thank you for saying what most people can never say in publicly or in print about Board members and senior management of company's who are completely out of touch and a pack of idiots.  I laughed out loud when I read your comment, "You gotta be freakin' kidding me!"  It continued when you commented about how tone deaf management is at Supervalu.  On top of the ridiculous retention bonus the board gave them, every recipient also has a very nice golden parachute when the company is eventually sold.  And I am sure the stock options all vest on a change of control when the business is sold.  Double dipping I believe is the term.

I may not agree with you on every thing but I respect your willingness to tell it as you see it.

Keep it up.  I wish everyone was as honest with their real opinions.

Another reader wrote:

This decision by the board at Supervalu is even more evidence that CEO's are not even trying to hide the fact that we live in a two-tier society in America. This is corporate welfare at its worst! Can you imagine the New York Mets paying a player past his prime because they want to "retain and motivate" him? Why is the standard in corporate America so different than the standard for their frontline workers, the ones who helped them get wealthy?

Giving bonuses to executives who tank a company is the norm in american corporations!  Do you think those same corporate execs complain about the lazy people who collect unemployment, or, eventually welfare?

From another reader, a former Fleming executive:

You have never been more correct. As a former Fleming associate, this is the same way Fleming acted. The board should be held accountable for these actions. The CEO should be fired now, not later.

One MNB user wrote:

I loved your response to the SV board. I have to add – what a great plan…let’s reward the managers leading us to our demise…are they hiring?

The worst news is the board is as badly detached from reality as the operational leadership.
Bye Bye Supervalu...too bad they were always great people to deal with.

From yet another MNB reader:

You Go Guy!  Why is it that the so called “Leaders” at the top don’t share in the sacrifice asked of the entire organization to help turn a company around.  What ever happened to lead by example, and  “Follow Me”.  Are those days gone?

Another MNB user offered:

I have been at Supervalu for 15 years. I saw the announcement about the retention bonuses for the top 4. It has created a negative buzz like I haven't seen here in awhile.

My take on it - I think it is criminal. Another example of an incestuous board taking care of their own at the expense of stockholders and employees. I tell you one thing - many of us would love to have those jobs at half the salary - I bet we would give it more than what we see at the top now.

And another:

I worked for a banner of Supervalu for over 30 years and was unceremoniously released last year. I have been reading their downward spiraling issues with a half-smile since.  But they have now gone completely over to the dark side. As was the case when the automotive companies executives took bonuses from the government bail-outs, the timing couldn’t be worse and the reasons are absurd. This reeks of a fait accompli. The friends I have that still work there will continue to show up and do their jobs (as you predicted) because they have pride and need their paychecks. But, if anyone thought morale could not get worse – guess what?

From still another reader:

Executives are very much in tune with the plight of their front line employees and their stores…and they don’t care!

Look at the difference between executive pay and front line pay over the last 30 years…bifurcation between privileged and under-privileged.

Look at the (lack of)respect executives have for front line people…this is not just a Supervalu issue.

Look at the (lack of) respect for shoppers…service…quality of products…toxic products…profits before people.

Gobsmacked?…You have been tracking these trends for some time…detailing specific examples of company after company…how can you be surprised?
Greed…class warfare…win/lose not win/win…climb the ladder then pull the ladder up…glass ceiling…these are all issues you have written about…how can you be surprised at SuperValu?
Executives get into the corner office, and all of a sudden they forget about the frontline people that worked their Butts off to get them there…they think their success was a result of their brilliant ideas!!
SuperValu is just doing the same thing as most businesses (there are exceptions, but they are rare)
Keep hammering these issues…the industry needs your slice of reality!!!

I guess I was surprised because I could not imagine that leadership and the board would be so ignorant of how their people feel.

And another email:

Your comment “You Gotta be freakin’ kidding me!” is absolutely correct. Wow, this just shows the stupidity of the people running the company as the employees should be very upset as many of them have been laid off. If upper management would have forfeited their bonus then they could get some respect from the employees but that just went out of the window. I hope the stock holders see this and demand that Craig resign. On the street Supervalu is called Stupidvalu.

And another:

I totally agree with your spirited rant about the executive retention packages. And then it suddenly hit me: SVU: It’s (Law and Order’s) Special Victims Unit, for victims of ‘heinous crimes’. Coincidence?

And another:

Not only will they throw a parade for Herkert, they will hire him back in Bentonville - He will become the president of Walmart Neighborhood Markets Southern California, formerly known as Albertsons Southern California.  Makes sense, it is a huge population base that is underserved by Walmart, and a 45,000 sq. ft. Albertsons SoCal Store would look pretty good as a Neighborhood Market.

And yet another:

What it comes down to is its all about GREED, and that's a shame. They just put an arrow in every employee who doesn't get the bonus. The down fall will escalate now. The real shame is, they don't even recognize the mistake, how perverse!

And another:

Funny how the options fully vest (July 2014) before a major ($490m) note is due (Nov. 2014) and then the colossal ($1.0B) note that is due May 2016.  Somewhere around that timeframe (but after July 2014 of course) seems to be when the ship will officially sink…..

Still another MNB user chimed in:

All of a sudden they want to retain?  A whole flock already went out the door (legacy SV) and we’re left with this bunch.  I’m not one to forward internal emails directly, but I’ll tell you when I read that one about the stock options I could’ve used some Pepto-Bismol.  I often wonder if a certain party was sent here like a Trojan horse.  There are good and dedicated employees who, as you said, will continue to do their best.  Some of us still have our work ethic, pride, etc. , despite the constant distractions.   Corporate America is, in general, an embarrassment.  GREED, corruption, misuse of power, screwing people out of pensions, and what’s the punishment?  Top executive buyouts and rewarding bad behavior.  This isn’t a new problem, it’s just gotten out of control.  There are no consequences that have any bite.

And finally...

The sad news today about the retention bonuses for the Supervalu execs is not surprising.  With the same issue taking place at Best Buy, outsiders must wonder what is "in the water" in Minnesota.

The big issue that rankles the average worker is how these poorly performing execs continue to get re-hired.  I am an ex Supervalu employee who became obsolete like the coffee/plates etc.  To bad these folks do not see the heartache and pain they cause in the MANY lives of good people who work hard to make the company successful.

Supervalu is far beyond "dead company walking" but one has to wonder how these people sleep at night.  Worst part is they will be (mis) managing another company in the future.

Just one more...

This brings to mind a quote from a Spenser novel, I believe it was “Bad Business." In one chapter, Spenser asks his CPA if a Board of Directors isn’t supposed to watch over and approve major moves by management, and his CPA replied, “From what I’ve seen they’d support mandatory pederasty if urged by top management.”

Gotta love Parker, he had a way of cutting through the nonsense.

Yes, he did.

I'm sure there will be more on this tomorrow....
KC's View: