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Walmart US president and CEO Bill Simon
Low sales won't keep Walmart's Bill Simon from getting incentive pay
Walmart's stock prices and sales figures aren't doing so well. Its workers remain seriously underpaid. But its top executives are doing just fine, despite the retail giant's growth slowdown.

Walmart's executives are supposed to get incentive pay when Walmart is doing well. This should count as a time when Walmart is not doing so well. It turns out, though, that the company can make "adjustments" to the actual financial results to make it look like things are going better for the purposes of calculating incentive pay. That's routine. What's not routine is the number of adjustments made this year—11, when, Gretchen Morgenson reports, "In each of the four previous years, the number of adjustments never exceeded five." And the adjustments have big effects:

Consider the case of William S. Simon, president and C.E.O. of Walmart’s United States unit. Under Walmart’s pay plan, he would receive some incentive pay if sales grew more than 2 percent.

The trouble was, Walmart’s United States sales rose only 1.8 percent in fiscal 2014. That meant Mr. Simon would miss his threshold.

Enter the adjustments.

After adjusting for certain items relating to the company’s sales, the Walmart unit eked out a growth rate of 2.03 percent in 2014. On the strength of that “adjusted” performance, Mr. Simon received $1.5 million, the proxy noted. His total compensation was $13 million last year.

If you're not entirely disgusted by the general overview that Walmart, notorious for the low wages in its stores, is adjusting its results to give millions of dollars in extra pay to executives already making millions of dollars a year, consider this: One of the adjustments made to give Bill Simon his $1.5 million in incentive pay was to pretend Walmart's sales didn't shrink after Supplemental Nutrition Assistance Program benefits were cut in November. Literally, explicitly, this multimillionaire was protected from the negative outcome of taking food out of the mouths of millions of poor and near-poor Americans.

Now, cutting food stamps wasn't a decision anyone at Walmart made. But it's a perfect example of how people at the top are protected from the things that hit people at the bottom. And if people at the top weren't protected—if their fates were linked to people at the bottom in the most basic ways capitalism suggests they should be—do you think maybe people at the bottom would fare just a tiny bit better?

Originally posted to Daily Kos Labor on Mon May 12, 2014 at 11:14 AM PDT.

Also republished by Daily Kos.

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Comment Preferences

  •  Piketty and "the Rich get richer..." (7+ / 0-)

    the rest get tinkled on

    2012_04_100100_1h  Trickle Down Economics

    Warning - some snark may be above‽ (-9.50; -7.03)‽ eState4Column5©2013 "I’m not the strapping young Muslim socialist that I used to be" - Barack Obama 04/27/2013 (@eState4Column5).

    by annieli on Mon May 12, 2014 at 11:19:15 AM PDT

    •  Speaking of the devil (1+ / 0-)
      Recommended by:
      ER Doc

      Obama’s Top Economist Has Some Problems With Piketty’s Book

      The money quote:

      In addressing his recommended policies for fighting global inequality, Mr. Furman mentions longstanding priorities of the Obama administration, such as expanding access to preschool, striking international trade deals and raising the minimum wage.
      lolwut

      “In the beginning there was nothing, which exploded.” Terry Pratchett

      by 420 forever on Mon May 12, 2014 at 11:46:07 AM PDT

      [ Parent ]

      •  no Christina Romer, he (2+ / 0-)
        Recommended by:
        420 forever, ER Doc
        Raised in New York City, Furman is the son of Jay Furman, a real-estate and shopping mall developer who donated more than $20 million to NYU  and serves on its board of trustees. His mother, Gail Furman, a child psychologist, heads the family's Furman Foundation, Inc, which funds mostly left-leaning nonprofit groups. His brother Jesse Furman is a judge of the U.S. District Court for the Southern District of New York.

        Furman graduated from the Dalton School in 1988. In 1992, he graduated with a B.A. in social studies from Harvard, where his freshman year roommate was Matt Damon. He then received an M.Sc. from the London School of Economics. Furman returned to Harvard, where he received an M.A. in government in 1995 and a Ph.D. in economics in 2003. His Ph.D. thesis advisor was N. Gregory Mankiw, who had once also served as Chairman of the CEA, during the administration of George W. Bush.

        Warning - some snark may be above‽ (-9.50; -7.03)‽ eState4Column5©2013 "I’m not the strapping young Muslim socialist that I used to be" - Barack Obama 04/27/2013 (@eState4Column5).

        by annieli on Mon May 12, 2014 at 11:58:12 AM PDT

        [ Parent ]

  •  I blame all of this on giving (1+ / 0-)
    Recommended by:
    ER Doc

    every little league participant a trophy.

    Made eveyone feel entitled.

  •  They really are clueless how this looks to (2+ / 0-)
    Recommended by:
    JeffW, ER Doc

    the rest of us.

    "To live in a world where truth matters and justice, however late, really happens, that world would be heaven enough for us all." - Rubin "Hurricane" Carter

    by blueoregon on Mon May 12, 2014 at 11:49:26 AM PDT

    •  Why should they care how "this" looks to (0+ / 0-)

      blueoregon on DKos? Are you a Walmart shopper? Shareholder?

      New Republic: So are the left-wing blogs as bad as the Tea Party ones in this case? -------------------------Chuck Schumer: Left-wing blogs are the mirror image. They just have less credibility and less clout.

      by AlexDrew on Mon May 12, 2014 at 12:59:48 PM PDT

      [ Parent ]

      •  Not now. At one time, about six years ago, (2+ / 0-)
        Recommended by:
        JeffW, METAL TREK

        when I struggled with a serious debt problem, Walmart was one of my only options.  Better now thank you very much puritan work ethic and good luck and no longer rely on Walmart for anything.

        Still, it's tragic how Walmart is able to exploit economic inequality for the benefit of it's  . . . not owners, as executives . . .  because banks, government, communities, have all bailed on . . . solving problems.  Blame is easier.

        Once you put convenient, lethal force in the mix, liberty becomes a zero sum game. -- DIgby on open carry.

        by Rikon Snow on Tue May 13, 2014 at 05:49:18 PM PDT

        [ Parent ]

      •  THAT is exactly the fucking problem. (0+ / 0-)

        They don't give a shit and you think that is ok.

        Of course they don't care what one person on here thinks, but your facetious question really is, why should they care what 100 million people like blueoregon think?

        And they don't give a shit, and you apparently think that's ok.

        Please know I am not rude. I cannot rec anything from this browser. When I rec or post diaries I am a guest at some exotic locale's computer. Ayn is the bane!

        by Floyd Blue on Wed May 14, 2014 at 04:38:54 AM PDT

        [ Parent ]

  •  They aren't. They just couldn't care less. nt (1+ / 0-)
    Recommended by:
    JeffW

    “In the beginning there was nothing, which exploded.” Terry Pratchett

    by 420 forever on Mon May 12, 2014 at 11:56:02 AM PDT

  •  Oh, you haters just gotta hate (2+ / 0-)
    Recommended by:
    ER Doc, NXNW

    Why should Bill Simon take it in the wallet because not enough of you trooped over to Wal*Mart to buy their crappy merchandise? Or if you did, why didn't you buy more? And don't give me any of that "credit card was maxed out" bullshit, because you can always get another credit card! It's in the Constitution somewhere, I think.

    Besides, what difference does it make to you socialist maniacs what a private company does with its money? It's their money, they earned it, so what they do with it is none of your concern, you commies.

    Oh, and Wal*Mart is going to need about a dozen more officers from the local constabulary to break up that gang of protestors with their "increase the minimum wage" signs. They're gonna need a whole lot of tasering or they might turn violent.

    •  You're about four inches to the side of target (0+ / 0-)

      on Bill Simon there.  (Assuming of course he keeps his wallet in his back pocket.  If he is a front pocket guy, I withdraw my post).

      Please know I am not rude. I cannot rec anything from this browser. When I rec or post diaries I am a guest at some exotic locale's computer. Ayn is the bane!

      by Floyd Blue on Wed May 14, 2014 at 04:40:42 AM PDT

      [ Parent ]

  •  It's never the executives' fault. (4+ / 0-)
    Recommended by:
    JeffW, ER Doc, sfbaytransplant, NXNW

    Those hourly workers just don't work hard enough!

    " Armageddon could be knocking at my door. But I ain't gonna answer that's for sure." - Kristian Bush, Jennifer Nettles, Kristen Hall

    by rustypatina on Mon May 12, 2014 at 01:42:14 PM PDT

    •  And where have we heard THAT before? (0+ / 0-)

      Oh yeah. Stalin era USSR. "We didn't meet the goals so we're all starving because we didn't work HARD ENOUGH for Comrade Stalin".

      Funny that a bunch of rich white guys who claim to HATE teh sochulizm and commies use a tactic straight out of Uncle Joe's playbook. :)

      A village can not reorganize village life to suit the village idiot.

      by METAL TREK on Tue May 13, 2014 at 10:48:57 PM PDT

      [ Parent ]

  •  The first time I was aware (4+ / 0-)

    of the strangling effects of executive pay and shareholder dividends was in about 2000.  That's when they explained why our workload was being doubled and we had to do the Who Stole My Cheese training.  I didn't find another person who understood what they were telling us, and I was fired after the Bush post 9/11 recession along with my boss and her boss.  It was the best paying job I ever had.  I'm sickened by the people who say paying a living wage will make prices go up.  Equity isn't socialism.  If I can get back into a service job, a living wage is not only a living wage, it gives a person respect.  Trust me, if the public knows you are making $8 an hour they will treat you as such.  

  •  I wonder how much of that 1.8% increase in sales (1+ / 0-)
    Recommended by:
    JeffW

    was simply inflation.

    Walmart isn't doing well because the people who are most of their customers aren't doing well.

  •  Erm...wait.... Sales "increased" by 1.8%... (1+ / 0-)
    Recommended by:
    JeffW

    The inflation rate was 1.74%.....  Seems like that would make for about a 0.06% increase in sales.

  •  I won a $50 Walmart gift card as a door prize... (1+ / 0-)
    Recommended by:
    PsychoSavannah

    ...a year ago. It appeared from under a pile of papers recently, so I figured that despite my opinions of the firm and everything it stands for, I might as well use it. My wife needed a new electric toothbrush. That and some batteries and socks came to $56 and change. I did not enjoy to he experience.

    "So, am I right or what?"

    by itzik shpitzik on Tue May 13, 2014 at 05:44:07 PM PDT

  •  I did my small part to help WalMart not grow (1+ / 0-)
    Recommended by:
    JeffW

    I wouldn't walk into a WalMart store to get out of the bright sun.   I make it a point of pride that I have never bought anything from WalMart and I never will.  They sell cheap Chinese crap maintain (I'm told) dirty stores and don't pay their workers enough to live on.  Plus, the nearest WalMart is about 15 miles from my house, and that is way too far to drive when I can walk to my neighborhood strip mall.

  •  I suppose that this guy was as worthy (0+ / 0-)

    a recipient of that $1.5 million as the Waltons.

    It's not like any of the little people were going to get it one way or another.  

    So why bother getting riled up about how the 1%ers divvy up the spoils?  

  •  Just disgusting (2+ / 0-)
    Recommended by:
    PsychoSavannah, BigD145
    After adjusting for certain items relating to the company’s sales, the Walmart unit eked out a growth rate of 2.03 percent in 2014. On the strength of that “adjusted” performance, Mr. Simon received $1.5 million, the proxy noted. His total compensation was $13 million last year.
    Some people would call that fraud.

    Living is easy with eyes closed...

    by skybluewater on Tue May 13, 2014 at 06:00:08 PM PDT

  •  And why did they even bother? (1+ / 0-)
    Recommended by:
    METAL TREK

    If they want to pay their executives millions or more in bonuses, they don't need to justify it, especially not with 11 different adjustments. This just makes them look petty right down to their very cores.

    Think how this must look to the assistant manager working 58 hours a week.

    Sorry, Miss Jones, we really can't afford to give you a raise, sales were flat this year, but we're going to bend over into a pretzel shape in order to give our senior execs a 1.5 million dollar bonus this year.
    That this story got released at all is probably worse than if WalMart had just given out the money without any justification. Right now I think I'd hate to work there (thankfully I don't) even more than usual.

    Do Pavlov's dogs chase Schroedinger's cat?

    by corwin on Tue May 13, 2014 at 06:21:27 PM PDT

  •  No trickle down here. (0+ / 0-)

    As long as Walmart purchases their goods from China where labor laws are non-existent, as long as they pay wages that will still keep employees in the poverty bracket, as long as a full-time employee of Walmart still has to rely on government assistance for basic needs for their families, then those big bonuses should be pouring in.

  •  Executive positions aren't even a job anymore, (1+ / 0-)
    Recommended by:
    METAL TREK

    performance is almost irrelevant.

    Its just a form of corporate 'wealthfare' where the rich feed each other money through the system. Give a few years and you get 10m+ out of the deal and you are ready to be a .01% all clean and legit.

    There's your capital son go make something of it 'all by yourself'.

    Join the DeRevolution: We are not trying to take the country, we are trying to take the country back. Get the money out of politics with public financed campaigns so 'Of the People, By the People and For the People' rings true again.

    by fToRrEeEsSt on Tue May 13, 2014 at 06:47:23 PM PDT

  •  Quite the Juggling Act: (0+ / 0-)

    Criticizing Walmart on the one hand... while simultaneously supporting Hillary Clinton, a former member of Walmart's Board of Directors, is an exercise of amazing cognitive flexibility.

    The 1% are Purists: They only support Candidates that Deliver Results They Can Bank On. Don't they know they should compromise? /sarcasm

    by Johnathan Ivan on Tue May 13, 2014 at 06:55:32 PM PDT

  •  Quick comparison (0+ / 0-)

    *FULL DISCLOSURE - I AM AN APPLE SHAREHOLDER*

    Comparing Wal Mart and Apple stock (as of todays close)

    Walmart:

    Price to Earnings - 16.3
    Price to Book - 3.26
    Net Profit Margin - 3.3%

    Apple:

    Price to Earnings - 14.7
    Price to Book - 2.61
    Net Profit Margin - 21.68%

    If you are not familiar with the terms P/E ratio tells you how many dollars of stock price it took to produce a dollar of earnings.  In this case Walmart needed you to invest $16.30 to earn a dollar.  Apple only asked for $14.70.

    Price to book means how over the book value you are paying.  Book value is the notional value of the company if you closed it and sold off all its assets.  Walmart stock cost 3.26 times as much as if you closed it and sold it off.  Apple cost 2.61.  This is a much bigger difference than the numbers show because much of the "value" of Wal Mart is in real property - all those stores.  There is nothing "special" about Wal Mart other than their size.  They sell groceries, clothes and stuff, just on a grand scale.  Apple on the other hand has a TON of intellectual property that is not reflected in book value.  It also has one of the most valuable brands on the planet - the most according to Forbes which puts its value over $100 billion.  By comparison Wal Mart is valued at $20 billion.  Again, this is not reflected in book value.  

    Net profit is how much the company earns for every dollar of sales.  Wal Mart makes 3 cents, Apple 21 cents.  Wall Mart has to sell 7 times as much "stuff" to make the same amount as Apple.  This reflects both the margins on the stuff sold and the cost of doing business.  Wal Mart is huge with over 1.8 million employees with huge overhead.  Their "thing" is selling cheap stuff cheaply.  Apple sells expensive stuff at a premium.  

    Strangely despite fundamentals that show that Apple is a better investment, Wal Mart is a more "expensive" stock.  Not in price per share but in all the other factors.  When you look at growth potential Wal Mart is even worse.  America only needs so much cheap crap and you can only cut costs so much.  They might have reached their top end already.  This isn't a pitch for Apple.  To me it shows me that not only is Wal Mart cooking the books to pay executives undeserved bonuses, their stock is overpriced.  Shareholders are paying executives bonuses for not doing their job.  

    It is well that war is so terrible -- lest we should grow too fond of it. Robert E. Lee

    by ksuwildkat on Tue May 13, 2014 at 07:18:19 PM PDT

    •  Your Apple stock (0+ / 0-)

      Was made in the same country as Walmart's cheap crap.

      •  Not quite (0+ / 0-)

        There is a great book called Naked Economics that lays out a couple of big ideas - that education is the key to GDP growth and that as your gain education you move out of ow margin stuff into high margin stuff.

        Many Apple products are assembled in….ok lets say it, China.  That is not necessarily a bad thing.  Why?  Because some of that assembly is not work we want to do in a high GDP country.  

        At the most basic level, humans are hired for pure muscle labor.  If all you can provide is muscle labor, the entire world is competing with you and if someone will work for one penny less than you you will not get hired.  Pure race to the bottom.  You trade one hour of work for x dollars.  

        The next step up is skilled labor - Swinging a hammer, using a saw, turning a wrench.  The amount of skill increases the value of the labor.  But the labor is still all yours.  You get a higher X for your hour but you still have to put in the full hour.  And eventually high end skills move down market.  THink watch making - at one point it was one of the most intense skills around and demanded a very high rate.  Today it is near the bottom of the skilled labor market.

        The next step up is the knowledge market where you earn based on brain power application.  This is where we want to be as a high GDP economy because unlike labor, knowledge is much harder to turn into a commodity.  Knowledge labor is not time dependent.  What is the hourly rate for how long it took to think up Facebook?  For that matter, for DailyKos?  Did/Does Kos put in long hours to create and maintain his creation?  Of course.  But there is no cost per hour, just a return on knowledge.  As a Photographer I bill for an output.  I calculate how much time it will take me and then the effort involved, overhead consumed and then "stuff" and come up with a cost.  For a simple job it might work out to $20 a hour.  For a complex one, $200 an hour.  

        So here is what Apple does - through knowledge (design, interface, style, operating system) it takes $200 of raw materials and labor costs and turns it into a $700 item.  That is the difference between the raw bill of materials and assembly costs and what Apple charges for a full price, not carrier subsidized, iPhone.  All the Chinese companies have to find a way to make a profit inside that $200, including paying their own raw costs, management overhead, infrastructure, etc.  Apple pays $200, applies knowledge and creates a $700 product.  They get to find their profits inside that $500.  That is why Apple has a net margin of 22% (which is down from historic levels around 28%) and Wal Mart has a margin of 3%.  At one time Wal Mart applied knowledge in the form of supply chain management to create margins.  Today all they do is cut staff and mooch off taxpayers.  They can't get any more from either and so they are stuck.  If they raise prices, they lose their only selling point.  

        Even in the darkest days of Apple the management refused to follow the industry trends of trying to make cheap PCs.  While Dell and others proclaimed that the future was $500 PCs Apple continued to offer very little under $1000.  Steve Jobs said there was no point in selling computers at prices so low they endangered the company.  Instead of trying to offer $500 PCs worth $500 he wanted to offer $1200 PCs worth $1500.  Before Dell went private it was worth about 1/4 of Apples CASH on hand - also known as lose change.  

        So yes, while Apple has moved its low margin, low skill jobs else ware, its high margin, high skill jobs remain in this country.  Those high margin, high skill, high GDP jobs are what we WANT in this country.  That is not to say we don't need other jobs here and we need them to pay a fair wage but moving low skill jobs to low skill workers is not inherently bad.  

        It is well that war is so terrible -- lest we should grow too fond of it. Robert E. Lee

        by ksuwildkat on Wed May 14, 2014 at 09:56:55 AM PDT

        [ Parent ]

  •  This is nothing new (0+ / 0-)

    People in charge of large sums of cash change the rules to benefit themselves. It happens all over the world, and throughout history.

    The trick is to keep it all "legal", so nobody can recoup the money afterwards.

    I wonder if they spend as much energy actually doing their jobs as they do tweaking the books to improve their bonuses.

    Freedom isn't free. That's why we pay taxes.

    by walk2live on Tue May 13, 2014 at 10:33:52 PM PDT

  •  I'm not surprised (1+ / 0-)
    Recommended by:
    BigD145

    Until recently, I worked for a big box retail store--and in the office, where I worked with some of the books. (Not "Wallies," but I can't really say what company.) A relatively small store in a relatively small market, we were the only store in our district to post increased sales last Christmas crazy season. We were eleventh in the nation in the annual charitable campaign--and that's straight-up dollars, not relative to size. We had a new manager, freshly trained by Corporate, and we were innovating some processes to turn some unprofitable departments into the black. None of those processes required reducing pay, and we actually hired extra people for some of them.

    So Corporate closed us.

    The company needed cash (mostly for bonuses to execs, but also to stave off the bankruptcy to which those bonuses will eventually lead). And a turnaround store would produce more cash than a dying one.

    So "adjustments" were made. We received a ton of unsaleable goods from other stores, so their balance sheets looked better and ours looked much worse. Some income was post-dated; some expenses were pre-dated; operations now looked worse and liquidation now looked much better. A host of little, arcane changes took place so that by the end, Corporate could claim they were doing everyone a favor by getting rid of us. The predictable upshot? There won't be any more turnaround stores in our district, not now.

    So no, I'm not surprised by Wal-Mart's accounting antics. If you can do that with just one store, it's hard to see what could stop them from doing it with an entire corporate operation.

  •  This isn't really unreasonable (0+ / 0-)

    While of course it's unconscionable that the game is rigged at all, the actual rigging doesn't seem that unfair. Quite the opposite; any time there's a performance-based incentive, it makes sense to account for factors beyond the employee's control.  The linked article even notes that in 2012, those adjustments resulted in decreased executive pay.

    The basic concept is sound.  The problem is two-fold: one, the optics of the situation are bad, and two, the bonuses and executive base pay are obscene to start with.

  •  Walmart execs get incentive pay. (0+ / 0-)

    Where is that incentive pay for workers? At part time work and cheap wages, (with a full time - but near impossible to get -work schedule making less than 20 K a year - but a little more if you factor in food stamp pay and Section 8 pay.) they could certainly use it....Did the exes get the extra pay because they stepped into the breach, because of slow sales and layoffs, and actually been out in the warehouse unloading and loading trucks? (smirk)

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