Saturday, April 21, 2018

Earlier this week we had a post explaining how Calcbench subscribers can research the hot new metric of 2018, the CEO Pay Ratio disclosure. Now that companies are filing their proxy statements at a steady clip, we decided to look at what two retail giants, Walmart and, had to say about their respective CEO overlords.

First is Walmart. The company filed its proxy statement on April 20, and included three paragraphs’ worth of disclosure about how it defined a “median” employee for purposes of calculating the pay ratio. (Remember, the CEO Pay Ratio rule requires companies to calculate the ratio of total compensation of the CEO to total compensation of the median employee.)

Figuring out the median employee is no easy feat for Walmart, which employs 2.2 million people in countries all over the world. Some are part-time hourly workers, others are full-time hourly workers, and some are salaried. So Walmart had these 342 words to say about the subject:

Considered Population. As of December 31, 2017, we employed approximately 2,306,496 associates worldwide, other than our CEO. As permitted by SEC rules, in order to determine our median associate, we excluded approximately 3.9% of our total associate population or approximately 89,951 associates outside of the U.S. from the following countries: Argentina (12,737); Bangladesh (95); Botswana (864); Costa Rica (16,390); El Salvador (4,314); France (2); Ghana (164); Guatemala (10,299); Holland (2); Honduras (3,997); Hong Kong (7); India (5,529); Indonesia (11); Ireland (22); Italy (2); Kenya (69); Lesotho (173); Luxembourg (2); Malawi (141); Morocco (3); Mozambique (519); Namibia (272); Nicaragua (4,021); Nigeria (370); Pakistan (23); Peru (6); South Africa (29,089); Spain (20); Sri Lanka (52); Swaziland (46); Tanzania (67); Thailand (4); Turkey (75); Uganda (78); Vietnam (25); and Zambia (461). Therefore, an aggregate associate population of approximately 2,216,545 was considered (the “considered population”) in determining our median associate.

Identifying our Median Associate. In determining our median associate, we used calendar year 2017 gross earnings – meaning total amounts paid before deductions or adjustments, including wages, overtime, bonuses, and the value of any equity awards that vested and were paid to an associate during calendar year 2017. Adjustments were made to annualize the gross earnings of all newly hired permanent associates in the considered population who did not work for the entire calendar year 2017. From the considered population, we then used statistical sampling to identify a group of associates who were paid within a range of 0.5% above or below what we estimated to be our median gross earnings amount (the “median population”). We then reviewed recent historical taxable wage data of the median population, and for those associates within the median population with stable wages, we calculated each of their fiscal 2018 total compensation in the same way as we calculated our CEO’s fiscal 2018 total compensation as set forth in the Summary Compensation table on page 66 and identified the median compensated associate from this group.

And in another paragraph, Walmart fell all over itself to say that since, ya know, it’s the largest company in the world and all, its CEO pay ratio may not be comparable to other mere mortal companies:

Our company is unique because we are significantly larger than most of our peer group companies in terms of revenue, market capitalization, and the size and scope of our worldwide associate population. Therefore, our reported pay ratio may not be comparable to that reported by other companies due to differences in industries, scope of international operations, business models and scale, as well as the different estimates, assumptions, and methodologies applied by other companies in calculating their respective pay ratios.

All those preliminaries out of the way, Walmart then dropped the bomb:

Based upon the estimates, assumptions, and methodology described above, the fiscal 2018 annual total compensation of our CEO was $22,791,276, the fiscal 2018 annual total compensation of our median associate was $19,177, and the ratio of these amounts was 1,188 to 1.

Prime Brevity

Contrast all that disclosure to what had to say, when it filed its proxy statement on April 18. Amazon gave investors a measly 90 words of explanation:

The 2017 annual total compensation of our median compensated employee other than Mr. Bezos was $28,446; Mr. Bezos’ 2017 annual total compensation was $1,681,840, and the ratio of those amounts is 1-to-59. For purposes of identifying the median compensated employee, we took into account salary, bonus, and grant date fair value of RSUs granted during the year for all our employees as of December 31, 2017. We annualized this compensation for employees who did not work the entire year, except for employees designated as seasonal or temporary.

Amazon wins points for simplicity. CEO Jeff Bezos keeps his compensation simple, too: $81,840 in annual salary, plus $1.6 million in security and business travel costs. (Then again, he also owns 16.3 percent of Amazon, hence he’s still worth zillions of dollars.)

In comparison, Walmart CEO Douglas McMillon gets $1.27 million in salary, $15.7 million in stock awards, and $5.78 million in deferred compensation, retirement benefits, and the always popular “other” compensation.

Who is worth more to the company? Who is overpaid or underpaid? That’s your business. Calcbench is just here to make finding the data to help you decided a snap.

FREE Calcbench Premium
Two Week Trial

Research financial & accounting data like never before. Get features designed for better insights. Try our enhanced Excel Add-in. Sign up now to try the Premium Suite.