CVS Withheld Annual Bonuses for 2001, 2002 Looks up
CVS Corp. did not award annual million-dollar bonuses to its top executives as it missed its financial targets for fiscal 2001.
In an annual shareholder proxy statement filed with the U.S. Securities and Exchange Commission, the company said it paid Chief Executive Thomas Ryan a $993,750 salary. His salary in 2000 was $975,000 and he also received a $1.6 million bonus. Ryan, who is also president and chairman, did not receive any restricted stock, but was awarded long-term compensation in the form of 306,062 stock options valued at about $5.6 million. He also received $12,883 in other compensation, including his retirement plan.
Its four vice presidents also did not receive annual bonuses, which are short-term monetary incentives for company management to help the company reach higher profitability.
The tides may be turning in 2002, however, as Credit Suisse First Boston raised its stock rating on the drugstore chain to “buy” from “hold,” according to Reuters. The upgrade is based recovery in pharmacy trends, expected stabilization in promotion needed to drive non-pharmacy sales, earnings expectations that are achievable for the next two quarters at least, and an attractive valuation.
Moderator Comment: Should bonus programs for top management be directly tied to profitability?
CVS has sent the right signal to its employees and the market. With store closings, layoffs, etc., it would be more than just a little hard to justify bonuses for top management. Of course, we do have the recent example of Kmart petitioning the court for money to pay bonuses, which had everyone asking the question, “You’re kidding, right?” [George
Anderson – Moderator]