CINCINNATI - Somebody drained the bonus pool at Macy's Inc. this year. Fortunately, there was a phantom-stock hot tub nearby.
The Cincinnati-based retailer delivered its annual proxy statement to shareholders this week, which includes the compensation details for its highest-paid executives.
CEO Terry Lundgren took a 22 percent pay cut to $11.3 million for the fiscal year ended Feb. 2, largely because his cash bonus declined 63 percent to $1.9 million. The board's compensation committee explained that Macy's fell short of its cash flow goals for the year, reducing bonuses for all top executives.
Chief Financial Officer Karen Hoguet saw a 23 percent dip to $2.7 million. Total pay for Chief Private Brand Officer Timothy Adams fell 24 percent to $2.6 million. And Chief Administrative Officer Thomas Cole, who left Macy's after a 41-year career in January, took a 27 percent pay cut in his final year to $2.9 million.
But that's not the entire pay story for Macy's this year. Its top managers also received a big "phantom stock" award in February as part of a three-year incentive program that was disclosed in prior proxy statements. So, the pay wasn't mentioned in this year's proxy, but it still delivered a $7.2 million payday to Lundgren on Feb. 2. Hoguet received $1.6 million from the phantom-stock payout, Adams about $879,000.
"Executive compensation is complicated to say the least," said Terry Kelly, investment advisor for downtown-based Bartlett & Co. "When you have compensation programs measured and paid out over a period of years, that complicates it even more."
But Kelly deemed the Macy's pay arrangements to be fair, based on the company's surging stock price over time and the fact that Macy's cash flow only fell below its targeted levels because the company made a big investment in inventory late in the fiscal year. The goal was to boost year-end sales and it worked, said Macy's spokesman Jim Sluzewski, as sales climbed 11.7 percent in January.
"There's no doubt in my mind they did that to improve the business," Kelly said, even though it cost them in the form of a smaller cash bonus.
While it may have been light on cash awards, the Macy's compensation committee heaped on the praise for its management team's results over the last four years.
"We have become a customer-centric organization that embraces localization, a seamless omnichannel blend of stores, online and mobile, and more meaningful customer engagement on the selling floor," said the compensation committee report. "The stock price has reacted favorably during this time period on both an absolute and relative-to-peers basis, with total shareholder return over the 4-year period of 367.3%, which is at the 66th percentile versus our 10-company peer group over the same 4-year period."
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