CINCINNATI - Macy’s Inc. paid Terry Lundgren $12.1 million in his last full year as CEO, a 4.7 percent increase over last year.
Lundgren’s 14-year tenure as CEO ended on his 65th birthday, March 23. New CEO Jeffrey Gennette, who received a 5.5 percent raise to $3.9 million, was promoted to president and announced as Lundgren’s successor last June.
Macy’s nearly doubled in size under Lundgren’s leadership, peaking at $28.1 billion in 2014 sales. But revenue and profits have steadily declined since then, as the department store chain lost ground to online retailers and discount chains.
The company has announced plans to close about 100 stores and eliminate more than 10,000 jobs to raise money for new growth initiatives.
But Macy’s highest-paid executives all received raises in 2016, as the company’s directors deemed Macy’s sales, cash flow and profit performance worthy of bonuses totaling more than $725,000.
The cash awards helped Chief Financial Officer Karen Hoguet boost her total compensation to $2.4 million, up 4.8 percent from last year. Chief Growth Officer Peter Sachse received a 139 percent raise to $7.9 million in 2016, although much of the raise came from severance payments following his end-of-year termination. Sachse received $2.7 million in severance plus 18 months of health care and $35,000 for legal fees and outplacement services.
Macy’s board noted that its executives received only 13.7 percent of the targeted cash and stock awards they could have received if the company met its financial goals in 2016.
“Mr. Lundgren forfeited approximately 79 percent of his targeted total compensation opportunity when performance levels were not achieved,” the board wrote in a proxy statement to shareholders.
The board also stressed that stock options awarded in prior years are now worthless to Macy’s bosses. Lundgren, for example, received an option grant worth $3.2 million when it was awarded. But the shares only have real value if they can be sold above the $58.92 stock price at the time of the grant. Macy’s shares closed at $29.64 Friday.
Macy’s compensation committee established a total compensation target of $9.9 million for Gennette in 2017 and $7.25 million for Lundgren’s upcoming year as chairman. Because of “Gennette’s inexperience in his new role,” Macy’s board set his compensation target below median pay of a dozen retailers to which Macy’s compares itself.
Lundgren’s pay target was based on “the critical role he will continue to serve during the leadership transition, including as an advisor to Mr. Gennette and also with regard to continued leadership of our real estate and China strategies,” the board noted.