What's behind the big executive comp package for the Nordstrom brothers? It's not as if they earned it with last year's performance.
Blake, Pete and Erik Nordstrom each accepted compensation packages that more that doubled last year, according to a story by my colleague Janet I. Tu. One problem is that Nordstrom was also laying off hundreds of employees and saw net income fall.
This doesn’t appear to be a case of a weak board. Nordstrom has an independent chairman, Philip Satre of Harrah’s Atlantic City, and eight directors out of 13 are from outside the company, including Alaska Air Group CEO Brad Tilden. The $5.8 million packages the brothers received were hardly Howard Schultz territory (more than half a billion dollars in nine years at Starbucks).
The proxy statement is unconvincing when it states that the brothers’ pay was “well below the peer median.” What? One or more of the Nordstrom brothers are going to fly off to Macy’s for better scratch?
More convincing is this from the story: ” ‘…in mid-2016, recognizing the significant challenges faced by our company and many of our full-line retail peers,’ the committee issued that equity award ‘for selected executives to strengthen alignment between executive and shareholder interests during this transformative period in the retail industry.’ ” Most of the comp is in stock and options.
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To be sure, the Nordstrom brothers are already pretty darned “aligned.” Each already owns about 2.8 million JWN shares, according to S&P – worth $120 million to each on a bad day. It’s not as if they’re lacking incentives to raise the stock price.
However, the board may have felt it necessary to signal Wall Street, which pays attention to such things. Translation: See, we’re strengthening alignment between executive and shareholder interests (go attack somebody else).
The trouble is this doesn’t necessarily entail customers. Like everything from opera to newspapers, classic department stores are caught between an aging loyal base and young people with little affinity for the product (and they risk alienating the former while pursuing the latter). And, like all traditional retailers, even Nordstrom is facing tremendous challenges from e-commerce.
The sum of all fears would be a forced merger with Macy’s (headquarters would stay in Cincinnati) or a vulture capitalist going after one of Seattle’s most beloved institutions.
But one has to wonder what the big compensation increase at the top does to morale — a precious asset for a retailer that promises that rarity, unique customer service. It’s not as if the Nordstrom brothers need the money.
Today’s Econ Haiku:
Xi went after golf
As a sign of corruption
Now with Trump? Teed off.