Top ranking executives and board members at Federated Department Stores know the power of employee discounts. The company gives 20 percent off store merchandise to recruit and retain rank-and-file employees at Macy's and Bloomingdale's.
The execs and board are also using the discount perk as a means to motivate themselves to buy at the company's stores and websites. According to a Chicago Tribune report, top ranking executives and board members receive twice the discount (40 percent) that store workers and others in the company receive.
According to the company's proxy, the merchandise discount gives Federated "a competitive advantage in attracting, retaining and motivating executive talent."
The top spender at the company was Ronald Tysoe, the former vice chairman of the company. Mr. Tysoe, who retired in October, got $124,635 in discounts and $46,363 to cover taxes on the merchandise.
Chairman and CEO Terry Lundgren was the second biggest spender among Federated's employees and board. Mr. Lundgren got $48,382 in discounts last year and the company picked up an additional $21,219 for tax payments.
Mark Reilly, a compensation expert and partner at 3C, Compensation Consulting Consortium, said Federated is misguided in its executive discount package including provisions to pay the tax on purchases.
"It is one more excess," he told the Trib. "It doesn't seem right to offer more of a discount to executives than to other employees."
Federated is not the only company that gives executives bigger discounts than workers on the frontline. Nordstrom provides a 33 percent discount versus the 20 percent everyone else receives.
Others, however, have one discount for the entire company. Wal-Mart gives workers 10 percent off merchandise purchases and J.C. Penney offers a 20 percent discount.
Discussion Question: What is your view on the positives or negatives associated with executives receiving deeper merchandise discounts than frontline workers? What about the perk that provides for paying the taxes on the merchandise, as well?