Deja Vu All Over Again: Shifting the Goal Posts on Executive Compensation

In 2011, The New York Times reported on the Board of Directors’ decision to alter one of the criteria Walmart used to assess executive performance and thereby executive compensation. The result? As the Times described it, “Shifting the goal posts meant more money for Mr. Duke in the latest fiscal year than he would have received under the old arrangement.” 

Two years later, it seems that Walmart is again changing the rules, with possible consequences for executive compensation.

Bloomberg recently reported on Walmart’s struggles to keep shelves stocked. To assist in its effort to improve on-shelf availability, Walmart uses third-party firms to audit the shelves. Traditionally, third-party firms would not tell store managers or employees which products it was auditing—that way the company gets an accurate picture of on shelf availability.

But it seems that accuracy wasn’t Walmart’s goal. Bloomberg is now reporting that those products that are subject to audits will be identified with a green dot on the shelf label. That means store managers can now focus their employees’ restocking efforts to ensure that all items with a green dot are in stock—not exactly an accurate picture of on-shelf availability more broadly.

The proxy statement for this week’s shareholder meeting shows that the green dot system could benefit one group: management. Proposal 4 asks shareholder to approve a number of amendments to the Management Incentive Plan (MIP), and one of the amendments includes—you guessed it—on-shelf availability as a performance measure for awards under the MIP.

As they say, those that write the rules win the game.

What do you think?