Mary F. Sammons, Chairwoman & Former Chief Executive Officer of Rite Aid, was profiled on the AFL-CIO’s Executive PayWatch site, a website dedicated to exposing the outrageous compensation given to CEO’s while workers’ wages decline and corporations ship jobs overseas. While Sammons’ compensation is in the millions of dollars, Rite Aid management continues to try and short change its employees around the country on health care in contract negotiations.
Rite Aid Corp.
Mary F. Sammons, Chairwoman & Former Chief Executive Officer
Fiscal 2010 compensation
Salary $1,000,000
Stock Awards $374,976
Option Awards $783,837
Pension & Deferred Compensation $707,552
All Other Compensation $337,451
TOTAL $3,203,816
During Mary Sammons’s tenure as chairwoman and CEO of the drugstore company Rite Aid, the company’s stock fell 80 percent from around $5 a share when she took office in June 2003 to about $1 a share when she stepped down as CEO in June 2010. Sammons will continue to receive a base salary of at least $750,000 and may earn a $1.5 million bonus as Rite Aid’s chairwoman for the 2011 fiscal year.[1]
Under her employment contract—until the time she steps down as chairwoman in June 2012—Sammons is entitled to a golden parachute if she quits for any reason following a change in control.[2] As of Feb. 27, 2010, her severance benefit would be worth $9 million in cash, $202,000 in health benefits, $720,000 in supplemental pension benefits and $422,120 in stock options and restricted stock.[3]
What’s more, Sammons’ employment contract also guarantees the company will pick up the tab for $3.9 million in excise taxes on her golden parachute.[4] Sammons isn’t the only Rite Aid executive who is entitled to a golden parachute tax gross-up. (A tax gross-up is a payment for an executive that is equal to the executive’s tax liability.) Rite Aid’s current CEO John Standley is entitled to receive a $1.8 million tax gross-up on his golden parachute worth $4.6 million as of Feb. 27, 2010.[5]
Rite Aid’s stock price fell below $1 per share in 2010, increasing the likelihood the company could become a takeover target. Shareholders should be concerned that golden parachutes can reward executives for poor performance leading up to change in control. Moreover, the substantial costs of golden parachutes are increased when companies also promise to pay executives a tax gross-up.
1 Rite Aid 2010 proxy statement, May 21, 2010, page 63.
2 Rite Aid 2010 proxy statement, May 21, 2010, page 68.
3 Rite Aid 2010 proxy statement, May 21, 2010, page 69.
4 Rite Aid 2010 proxy statement, May 21, 2010, page 69.
5 Rite Aid 2010 proxy statement, May 21, 2010, page 70.