Why Wal-Mart executives make all that money

Similar to last year's annual shareholder's meeting, shareholders this year want to know why the CEO and other Wal-Mart executives are making all those millions while raking in more options and other perks. After all, Wal-Mart's share price hasn't exactly done a huge amount of movement in the last year to give shareholders a decent return on their investment. While Wal-Mart shares cracked the $50 barrier and closed this past Friday at $57.18 per share, they haven't exactly lit the scene on fire.

Three resolutions for this year's meeting deal with executive compensation. Are Wal-Mart executives being paid reflective of the company's performance? This is a question that comes up with almost every public company these days. Many believe executives ride the gravy train of salary, bonuses, and stock options to take full advantage of money lust and greed, and the boards of many public companies grant all these paydays while the company investor gets the shaft.

This is partly why there is such intense focus on quarterly results. That growth in share price needs to be there or executives start getting their collective feet put to the fire for those lavish compensation packages in the midst of tiny or insignificant share price growth.

Pay for performance

One of the great mysteries of the universe is why there is so much glad-handing and so many conflicts of interest on how boards of directors are chosen and who gets to vote on executive compensation committees. So, some Wal-Mart shareholders want to know where there money is going -- and the answer they don't want to hear is "into Wal-Mart's executive pockets."

And especially while Wal-Mart's rank-and-file employees enjoy one of the lowest living wages in the nation, by and large. The balancing question is this: do Wal-Mart executives do 10,000 times the job that the Wal-Mart cashier does? They get paid for it, but how can one reconcile these two types of jobs against each other? Sam Walton's long forgotten words, "Share your profits with all your associates, and treat them as partners" was seemingly lost once he passed away more than 15 years ago.

Regarding the first of the executive compensation shareholder proposals, it suggests that Wal-Mart executives would be paid according to predefined performance achievement goals. The Laborers' International Union of North America, who submitted this proposal, wants a stronger link between pay and performance "in comparison to peer company performance." In other words, rein in Wal-Mart executive performance based on the compensation models of the competition. Seems fair, although Target Corp. (NYSE: TGT) CEO Bob Ulrich is netting some nice sums in past years also.

Shareholders stick it to the SEC

The second executive compensation shareholder proposal deals with the lack of input the SEC gives shareholders of public companies to the boards of those companies in terms of voting power to help rein in executive pay packages in whatever form.

This is where the real power comes into play -- shareholders own a company, and they should definitely have a voice in determining executive compensation. The second proposal cites the UK-based practice where shareholders are allowed a nonbinding vote on executive pay. Just like last year, expect Wal-Mart's board of directors to vote nay on this proposal, although tougher SEC regulations should be created to give even the single-share shareholder a voice in executive compensation.

Moving on to the third shareholder proposal regarding executive compensation, this one deals with what happens when executives don't got those fat bonuses. This resolution would effectively recoup those unearned bonuses and make sure those bonuses were 100% earned and deserved. This one deserves the "DUH" statement, as all bonuses should be measured and distributed by predetermined metrics, yes?

Wal-Mart refutes all three executive compensation proposals

Wal-Mart says that it "engages in a thorough and disciplined process and considers a wide range of factors when reviewing and establishing executive compensation" while at the same time arguing that it does not need shareholder intervention into executive compensation practices. That's an easy statement, but unless complete transparency is given to the internal process, it will never hold up among Wal-Mart shareholders. Remember, Wal-Mart: you've blown this proposal away at past annual meetings, and it will continue coming back year after year. Ignoring it will not make it go away.

RiskMetrics, a proxy advisory firm, noted that between 2006 and 2007, the number of shareholder resolutions to public companies that dealt explicitly with executive pay almost tripled in quantity. Note to Wal-Mart (again): ignoring these types of proposals won't do anything; they will come up again, year after year, just like they surfaced last year and just like they will surface this year. The representatives in the audience of the Bud Walton Arena will be just as vocal and angry as they were last year, and a simple nay vote won't do it -- they'll be back, year after year. Never mind taking the lead in being green -- how about taking the lead in an area where more shareholders are feeling they're being completely ignored?

Stay tuned right here next week for another edition of The Wal-Mart Weekly. Until then, have a great week!