Attention Shoppers

Attention Shoppers

1. Discuss whether the structure of the executive compensation program is consistent with the corporate strategy for each company. 
At a minimum, consider the mix of compensation (i.e., fixed vs. contingent, short-term vs. long-term, accounting or stock price-based vs. non-financial-based). In your opinion, does the compensation program motivate executives to achieve strategic success?

Kroger

Corporate Strategy:

Kroger’s strategy included expanding their fresh foods and produce departments. They also decided to offer prepared meals to counter the high-end grocery stores competition.

Compensation Program:

Compensation package includes six elements: salary, performance based annual cash bonus and, performance based long-term cash bonus, equity, retirement and benefits and prerequisites. Kroger has short-term and long-term incentives for executives however, in 2006 no payments for the long-term cash bonus had been made. Kroger should consider more long-term incentives to retain executives and ensure continuous growth for Kroger in the future.

Safeway

Corporate Strategy:

In 2003, Safeway implemented a strategic initiative of redesigning stores. The new format stores included an upscale interior design with wood floors to replace the more dated white linoleum. They also offered a wider selection of fresh produce, high-quality meats and fish, prepared meals, and expanded offerings of natural and organic foods. To this end, the company added a private-label O Organics line of products certified by the USDA complement its standard Safeway SELECT brand. Many of the locations also included a Starbuckís store-within-a-store. Safeway wanted to make grocery shopping a more pleasant experience for customers.

Compensation Program:

Safeway’s executive compensation includes annual fixed salary, cash bonuses based on capital investments and ROI, and company equity based on financial performance, and retirement...