Taking Stock

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Start At The Top For Some “Super” Value: Three CEOs Took Home $12.68 Million in Fiscal ‘12

Despite another putrid year of earnings and sales at Supervalu, the three chief executive officers who have led the troubled Eden Prairie, MN retailer/wholesaler received a combined $12.68 million in compensation according to recent Security and Exchange Commission (SEC) filings.

Former CEO Craig Herkert, who was fired last July from Supervalu after slightly more than three years at the helm, was paid $4.69 million in fiscal 2012, up 23 percent from the previous year. That included $375,000 in base salary and an additional $1.39 million in stock and option awards. The majority of Herkert’s compensation, $2.75 million, was paid as severance.

After Herkert’s departure, non-executive chairman Wayne Sales stepped in as CEO (Sales was responsible for bringing Herkert on board in 2009). For his nine-month tour, Sales was paid $5.28 million, which included a bonus of $1.63 million, stock awards of $2.74 million, and a base salary of $865,000. Sales also was also scheduled to receive as much as $12.8 million as a “golden parachute.”

While Sales “earned” an exorbitant amount in his brief tenure, he (and financial advisors Goldman, Sachs and Greenhill & Co.) did find a buyer for Supervalu (Cerberus Capital Management). Prior to the March 21 closing of the deal, Sam Duncan was hired first as a consultant, and then as CEO of Supervalu in February. Duncan’s compensation in fiscal 2012 was $2.71 million (a $500,000 bonus and $2.1 million in option awards).

Contrasting to the large financial packages offered to the three CEOs and other current and former senior executives, Supervalu has aggressively sought to cut personnel and restrict other benefits.

When Cerberus completed the deal to acquire a controlling 30 percent stake in Supervalu, it also officially bought five former Supervalu operating divisions (877 stores) under a separate agreement. Shortly after the two-part deal was finalized, Supervalu riffed 1,100 employees. This followed several previous years of staff reductions (under the reigns of Herkert and his predecessor Jeff Noddle). Then last month, new CEO Duncan reinstated the company’s bonus plan (which Herkert axed), but only a certain segment of associates are eligible. That “selective” process clearly irked some veteran employees who didn’t qualify for the new bonus program, noting that Duncan failed to mention if or when wage increases and the reinstatement of the company’s “matching” 401(k) program would be addressed.

And then there’s the overriding issue of increasing sales. While it’s still early in the tenure of Duncan and his revamped team, there’s been little indication thus far that Supervalu’s initial moves have yielded significant sales gains.

And what might happen if, despite improved leadership and focus, Supervalu’s performance continues to languish? What if the operating banners don’t receive adequate capital investment to better compete in the overstored markets in which its corporately-owned stores are located? Exactly how will Supervalu reverse the negative momentum of declining market shares among all its regional supermarket chains? How will its Save-A-Lot unit more effectively compete with Aldi and (to a lesser degree) PriceRite? And will its independent retail (wholesale) division add new independent retailers to its base or even maintain its current roster of independents, some of whom have been unhappy with the company long before Duncan took the helm?

Duncan has addressed some of these issues in the past three months – now the proof will be in the action and execution.