WMT » Topics » Compensation Philosophy

This excerpt taken from the WMT DEF 14A filed Apr 19, 2007.

Compensation Philosophy

As the world’s largest retailer with over 1.9 million Associates worldwide, the Company’s compensation plans and practices must be tailored to attract and motivate Associates in a wide variety of positions and geographical areas. In addition, the Company believes that its global operations and status as the largest private employer in the U.S. present unique challenges from a management perspective, and the CNGC considers these challenges and responsibilities when reviewing and approving the Company’s compensation structure for the Named Executive Officers and other Executive Officers.

The CNGC is responsible for discharging the Board’s responsibilities relating to the compensation of the Company’s Non-Management Directors and Executive Officers. The CNGC reviews and approves the compensation of the Named Executive Officers to ensure that they are compensated in a manner consistent with the Company’s compensation philosophy, policies, and objectives. The primary objectives of the Company’s compensation program are to:

 

   

Provide fair, competitive compensation to the Named Executive Officers and other Associates based on their performance and contributions to the Company;

 

   

Attract the talent necessary to achieve the Company’s business objectives;

 

   

Retain the Named Executive Officers and other Associates by instilling a long-term commitment to the Company and its shareholders;

 

   

Develop a sense of Company ownership and align the interests of the Named Executive Officers and other Associates with shareholder interests; and

 

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Provide opportunities for greater financial rewards to those Named Executive Officers and Associates who perform and assume broader job responsibilities.

To achieve these objectives, the Company’s compensation program is designed to provide greater rewards and opportunities for advancement to Named Executive Officers and Associates who:

 

   

Assume, and succeed in, positions having a greater level of responsibility and, therefore, have the likelihood of greater impact on the overall performance of the Company; and

 

   

Demonstrate innovation and continuous improvement in their areas of responsibility.

As a result, the Company’s compensation program for Named Executive Officers places less emphasis on base salary and employee benefits and more emphasis on annual performance-based incentive payments and equity-based compensation. The Company designs compensation so that a substantial majority of the Named Executive Officers’ overall compensation is “at risk” and tied to the Company’s financial performance and Share price. In addition, the CNGC may, from time to time, grant performance and non-performance-based equity awards to promote retention of the Named Executive Officers, as well as other Executive Officers.

This excerpt taken from the WMT DEF 14A filed Apr 14, 2006.

Compensation Philosophy

Philosophy:    The CNGC’s philosophy is that a substantial portion of overall executive compensation should be at risk and tied to corporate performance. This philosophy focuses on the long-term interests of shareholders and seeks to align the interests of

 

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the Executive Officers with the Company’s continued growth and long-term performance goals. Generally, the CNGC places less emphasis on base salary and employee benefits than on annual performance-based incentive payments and equity-based compensation. The CNGC receives information from the Chairman, the CEO, and other Executive Officers regarding individual performance of Executive Officers and considers this information in approving total compensation and the allocation of compensation.

Base salary:    In approving base salaries of the Company’s Executive Officers, the CNGC considers the Company’s performance for the prior fiscal year and a subjective evaluation of each Executive Officer’s contribution to that performance. As measures of the Company performance for the year, the CNGC focuses primarily on net income, total sales, comparable store sales, return on shareholder equity, and other financial factors. The CNGC also considers other performance criteria, including diversity performance and operating performance in accordance with the business and ethical standards expected by Wal-Mart’s shareholders and the communities in which it operates. Base salary primarily rewards the Executive Officers’ individual performance in relation to Company performance.

Incentive and equity compensation:    The CNGC believes that a combination of annual incentive payments and equity awards strategically align the compensation of the Executive Officers with the overall short-term and long-term performance objectives of the Company. Incentive payments and equity awards implement the CNGC’s philosophy as follows:

 

    Incentive payments under the Management Incentive Plan reward Executive Officers for achievement of the Company’s annual pre-tax profit and diversity objectives,

 

    Stock options reward Executive Officers for long-term service to the Company through the appreciation of the Company’s Share price,

 

    Performance shares reward long-term revenue growth and return on investment, and

 

    Restricted stock rewards long-term service to the Company through the appreciation of the Company’s Share price and, when combined with a performance measure, such as revenue growth, rewards Company performance.

The CNGC seeks to relate the total compensation package for Executive Officers directly to the Company’s current and future success, which ultimately benefits the Company’s shareholders.

The CGNC determines the total compensation for each Executive Officer after subjectively evaluating: (1) the compensation provided to executives in comparable positions in companies in the Peer Group Survey and the Top 50, (2) the individual performance of the Executive Officer, and (3) the Company’s performance.

If maximum performance goals are achieved by the Company, the total compensation target approved by the CNGC would generally place the Executive Officers in the top quartile of the Peer Group Survey and would range from the median to the top quartile for the Top 50. Although the Peer Group Survey does not include all of the same companies that are included in the S&P 500 Retailing Index in the stock performance chart that appears below, the CNGC uses the data in the Peer Group Survey because it focuses on comparable companies, based on both size and industry. The CNGC granted the Executive Officers special awards of performance-based restricted stock during fiscal 2006 for retention purposes, which were not taken into consideration for purposes of comparison to the companies in the Peer Group Survey or the Top 50.

For information on compensation paid to executives in comparable positions in companies in the Peer Group Survey and the Top 50, the CNGC reviewed data prepared by outside compensation consultants. In approving compensation of the Executive Officers, the CNGC reviews and considers the allocation of total compensation (among salary, annual incentive payments, and equity compensation) paid by companies in the Peer Group Survey and the Top 50.

This excerpt taken from the WMT DEF 14A filed Apr 15, 2005.

Compensation Philosophy

 

The CNGC’s executive compensation philosophy is that a majority of overall compensation should be at-risk to focus management on the long-term interests of shareholders and to align the interests of the Executive Officers with the Company’s

 

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long-term goals. Accordingly, in determining or approving the compensation of the Company’s Executive Officers, the CNGC generally places less emphasis on base salary and employee benefits than on annual incentives and equity-based compensation.

 

Base salaries of the Company’s Executive Officers are set with reference to the Company’s performance for the prior fiscal year and upon a subjective evaluation of each Executive Officer’s contribution to that performance. In evaluating overall Company performance, the primary focus is on the Company’s financial performance for the year as measured by net income, total sales, comparable store sales, return on shareholders’ equity, and other financial factors. Other criteria, including diversity performance and whether the Company conducted its operations in accordance with the business and social standards expected of its Associates, shareholders, and the communities in which it operates, also are considered.

 

The purpose of Wal-Mart’s equity compensation awards is to focus officers’ attention on the continued growth of the Company’s operations and the shareholders’ long-term interests and to ensure that the Company is able to attract and retain the talent necessary to achieve its business, diversity, and community objectives. The total value and composition of the equity awarded to each Executive Officer is determined by the CNGC based on a subjective evaluation of the equity compensation provided to comparable positions at a select group of peer retail companies consisting of several retailers in the United States from various retail segments (other than the Company), ranked by total sales (the “Peer Group Survey”), and the top U.S. 50 companies (other than the Company), ranked by market capitalization (the “Top 50”); individual performance; and key Company performance metrics. The total equity awarded is delivered in a combination of stock options, restricted stock, and performance shares, which are granted annually.

 

Moreover, the CNGC believes that the combination of equity awards and incentive payments strategically align the compensation of the Executive Officers with the overall short and long-term performance objectives of the Company, while base salary rewards the Executive Officers’ personal performance in relation to the Company’s performance. Stock option and restricted stock grants reward Executive Officers for the long-term appreciation of the Company’s Share price, and performance share grants reward the Company’s long-term revenue growth and return on investment, and incentive payments reward the achievement of the Company’s annual profit and diversity goals. The CNGC believes that the total compensation package for the Executive Officers is directly related to the Company’s current and future success, which ultimately benefits the Company’s shareholders.

 

The Executive Officer compensation package generally is targeted to place Executive Officers’ total compensation in the top quartile of the Peer Group Survey, assuming maximum performance goals are achieved by the Company. In addition, the Company’s executive compensation package is generally targeted to range from the median to the top quartile for the Top 50, again assuming maximum performance goals are achieved by the Company. The Peer Group Survey does not include the same companies that are included in the S&P 500 Retailing Index in the stock performance graph because the CNGC believes that it is more appropriate to compare compensation of Executive Officers of the Company with that of executives in comparable companies based on both size and industry.

 

For information on compensation paid to executives in comparable positions in the Peer Group Survey and the Top 50, the CNGC reviewed data obtained from outside compensation consultants. In setting or approving compensation of the Executive Officers, the CNGC reviews and considers the allocation of total compensation (among salary, annual incentive payments, and equity compensation components) paid by companies in the Peer Group Survey and the Top 50. However, the CNGC makes a subjective judgment as to the appropriate allocation of total compensation among the various components in implementing its philosophy of providing a substantial portion of executive compensation in at-risk compensation.

 

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