The Boise, Idaho-based supermarket chain’s other 10 top executives may collect more than $146 million if they lose their jobs or quit following the closing of the controversial $25 billion merger. All told, the company could spend almost $190 million on severance packages and other pay for its executive team if the deal goes through, according to one April disclosure by the company.
Announced last fall, the proposal would be one of the largest retail mergers in history. The deal would give Kroger nearly 5,000 stores and more than 700,000 workers before an undetermined number of divestitures.
As thousands of its employees fret about their jobs and futures, Albertsons says there’s also uncertainty for its senior talent: “None of … the executive officers has entered into any agreement … with Kroger regarding employment,” the company said in the April filing.
To keep key leaders in place until the deal is done and integration begins, Albertsons is paying its executive team to stay put – $23 million under a “retention program.” This is on top of $123 million worth of severance and golden parachute payouts for the 10 top executives under Sankaran. While nearly a quarter of the retention money is earmarked for executives, the company has set aside a total of $100 million for retaining key personnel.
Vivek Sankaran is CEO of Albertsons Cos. Inc.
Disclosures: Albertsons CEO also got a hefty raise in 2022
In June, Albertsons also disclosed in its proxy statement that its median pay for workers was less than $32,000 a year.
In the same filing, the grocer also revealed it nearly doubled Sankaran's total pay last year to $16.1 million (up 86% from the $8.6 million in the previous year). Sankaran, 60, has been CEO of Albertsons since 2019. Prior to joining the grocer, he spend a decade in executive positions at PepsiCo.
Also in the June filing, Albertsons issued a lower estimate of the value of golden parachutes to top executives using a smaller per-share value than outlined under the Kroger deal. Under that estimate, Sankaran would get a $30 million golden parachute.
But the proxy refers back to the April filing as the "definitive information statement" regarding what would happen under the merger. That document says Sankaran would get $43 million in cash and stock.
The bulk of the Albertsons executives’ payouts would come from various stock awards that would be converted into equivalent Kroger stock – unless their employment ends under key circumstances. If an employee is fired without “cause” or quits for “good reason,” most of their restricted shares vest (this is, their ownership becomes free and clear) and they are also entitled to severance pay.
The company defines “cause” in contracts with its executives as misbehavior that includes illegal, dishonest, fraudulent or negligent acts. A “good reason” for quitting might be a major reduction in executive duties or relocation of a workplace.
Under his contract, Sankaran could quit for “good reason” since Kroger has made it clear McMullen will be CEO of the combined company. Albertsons estimates Sankaran would take full ownership of restricted stock that could be worth up to $33 million.
Also, Sankaran would receive another $9.9 million that includes his $1.6 million bonus, plus a lump sum payment that is 200% of both his base $1.5 million salary and $2.6 million target bonus, according to the April filing. Under his contract, he would also get nearly $31,000 to reimburse him for up to 18 months of COBRA health care coverage for him and family members.
Ultimate payout for executives in flux amid regulatory review and deal structure
Still, the ultimate payday for Sankaran and other top executives depends on some factors that are in flux.
Albertsons told The Enquirer the payout for its top executives outlined in the April disclosure may be "overstated" since the spring departure of Juliette Pryor, the grocer's general counsel, but did not offer updated figures.
Further, in a bid to mollify antitrust regulators, Kroger is mulling spinning off hundreds of stores into a separate company as part of the merger. If that occurs, Albertsons shareholders would get stock in the new company but also less cash.
Campbell Harvey, a finance professor at Duke University, said golden parachutes inevitably upset some shareholders and members of the public as they seemingly shower executives with several millions of dollars -- Gillette CEO James Kilts, for example, got almost $165 million when Cincinnati's Procter & Gamble took over his company in 2005. But what matters to shareholders is how much value executives create for them.
"Some people are going to be on the losing end of this, every merger has some rationalization or layoffs," Harvey told The Enquirer. "Golden parachutes are there to incentivize management to do what's best for the company... to make the company stronger."
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