Executive pay has certainly become a hot topic in recent times, especially when the compensation of some has grown while companies have floundered and/or top management has been engaged in various illegal activities.
Last week's announcement by Whole Foods that it was increasing the salary cap from 14 times the average pay of all full-time employees at the company to a multiple of 19 is an attempt to provide a level of transparency regarding its executive compensation packages.
The increase was the second since 1999 when the cap was 10 times the average pay of all full-time members. The result of the cap increases along with the average hourly wage of all full-timers at Whole Foods means that top salaries today have risen to $607,800 from a cap of $257,000 in 1999. Employee benefits, stock options and non-cash 401(k) contributions are not counted in determining and applying the salary cap.
During the same period, 1999 to 2006, the average hourly wage of all full-time team members went from $12.36 to $15.38. Today, the average annual wage of all full-time Whole Foods team members stands at $31,990.
In a company press release to announce the change in compensation policy, John Mackey, Whole Foods' chairman, chief executive and company co-founder, said, "We are raising the salary cap for one reason - to make the compensation of our key executives more competitive in the marketplace and help ensure their retention."
In addition to the salary cap news, Whole Foods also issued an announcement that Mr. Mackey will reduce his annual salary to $1 beginning on Jan. 1. 2007. He also said he would forego any further stock option rewards. He would, however, take advantage of the company's employee food discount card and health insurance.
"I continue to work for Whole Foods, not because of the money I can make, but because of the pleasure I get from leading such a great company, and the ongoing passion I have to help make the world a better place, which Whole Foods is continuing to do," said Mr. Mackey. "I am now 53 years old, and I have reached a place in my life where I no longer want to work for money, but simply for the joy of the work itself and to better answer the call to service that I feel so clearly in my own heart."
Whole Foods Historical Salary Cap Calculation
|
Year |
Average Hourly Wage |
Annual Wage |
Average |
Salary Cap |
|
1999 |
$12.36 |
$25,709 |
10 |
$257,000 |
|
2000 |
$12.84 |
$26,707 |
14 |
$373,900 |
|
2001 |
$13.46 |
$27,997 |
14 |
$391,900 |
|
2002 |
$13.69 |
$28,479 |
14 |
$398,700 |
|
2003 |
$14.07 |
$29,266 |
14 |
$409,700 |
|
2004 |
$14.66 |
$30,493 |
14 |
$426,900 |
|
2005 |
$15.00 |
$31,200 |
14 |
$436,800 |
|
2006 |
$15.38 |
$31,990 |
19 |
$607,800 |
Discussion Queations: Do you see Whole Foods' salary cap as an approach to head off any issues surrounding executive compensation at the company? Do you see the potential for internal conflict when hourly store team members see executive compensation rising at a substantially higher annual rate than their own?