Macy's gives CEO $14.5 million; a 23 percent bump

Anne D'Innocenzio
Associated Press

NEW YORK (AP) — Macy's Inc., which has posted strong sales gains throughout the economic recovery, gave its CEO a pay package worth $14.5 million in 2011. That's a 23 percent raise from the previous year.

Like many department-store operators, Macy's had slumping sales during the recession as Americans cutback on spending. But under Lundgren's leadership, the Cincinnati-based company has been able to boost sales by differentiating itself from rivals like Kohl's and J.C. Penney. Macy's has done that by offering more exclusive brands and tailoring the merchandise in each store to fit regional tastes.

Compensation for Terry Lundgren, who has been CEO since 2003, included a $1.5 million salary, stock and option awards worth $7.7 million and cash-based performance bonus of $5.1 million, according to documents filed with the Securities and Exchange Commission. All other compensation came to $78,925 and covered the costs for use of the company's aircraft.

A big portion of Lundgren's pay hike came from his option awards, which were valued at $3.1 million. That's up from $1.2 million in the year-ago period. Lundgren's performance-based cash compensation is based on a formula that examines earnings before interest and tax, sales, stock price performance and how it compares with its peers.

Under Lundgren's leadership, Macy's has been a standout among its competitors. For the year ended Jan. 28, for instance, the company reported net income of $1.25 billion on revenue of $26.4 billion for the year ended Jan. 28. That up from profit of $847 million on revenue of $25 billion in the year-ago period.

Macy's posted an increase of 5.3 percent in revenue at stores opened at least a year — an indicator of a retailer's health because it excludes stores that recently opened or closed. That exceeded its initial guidance of 3 percent and beat J.C. Penney Co.'s 0.2 percent increase and Kohl's Corp.'s 0.5 percent gain.

The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits, which makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive's stock and option awards for 2011 was the present value of what the company expected the awards to be worth to the executive over time.

Companies use one of several formulas to calculate that value. The number is just an estimate and the amount an executive ultimately receives will depend on the performance of the company's stock.

Most stock compensation programs require an executive to wait a set time to receive shares or exercise options.