Median age of Wal-Mart Stores board of directors falls below 55

Changes with the Wal-Mart Stores board of directors have shaved 11 years off the board’s median age in the past two years. The board in fiscal 2017 had a median age of 54, down from 65 in fiscal 2015, according to the retailer’s Proxy filed with the U.S. Securities and Exchange Commission.

Board Vice Chairman Rob Walton is the only director older than 70. Four directors are under 50 years old, which is what has brought down the median age. Seven of the 11 director nominees are under 60 years old, and four of those are under 50.

The Proxy shows the Bentonville-based global retailer has reduced the board size from 15 members three years ago to 11 in the recent year. With the leaner structure the board also split its compensation, nominating and governance committees into two groups. One of those committees will focus on executive compensation and management development, and the other is focused on director nominations and corporate governance, according to the Proxy.

“This new structure allows greater focus on aligning our compensation and performance management programs with our strategy, as well as emphasizing our continuing commitment to board refreshment and succession planning. To further this commitment, beginning in fiscal 2018, our independent compensation committee approved important changes to our executive compensation program to ensure that it continues to support our strategy as we transform our business,” the company noted in the filing.

DIRECTOR SLATE
The smaller board of 11 includes 7 independent directors and two female nominees. The spots held by females are down from four in 2015 when the board was larger. Linda Wolf is retiring as a director, a position she has held since 2005. The nominee to fill Wolf’s seat is Carla Harris.

Shareholders are asked to elect a slate of 11 directors at the retailer’s upcoming annual Shareholder Meeting slated for June 2. Board leadership also asked shareholders to reject three shareholder proposals brought by interest groups and to approve a nonbinding advisory resolution to approve the compensation of the retailer’s named executive officers.

“We are committed to an independent and robust Board and to thoughtful and effective Board refreshment, and have added 7 new directors in the past 5 years. This year, we are excited to announce Carla Harris as a new director nominee. Carla brings deep experience in capital markets and global finance, and I’m confident she will be an asset to the Board and to Walmart,” Board chairman Greg Penner noted in the Proxy.

He said the proposed board for the new year has a broad mix of experience, skills, and backgrounds which is a strategic asset for the company. Four of the proposed directors have less than three years on the Board. Three have spent between four and six years as a director, two have between seven and 10 years, and two have more than 10 years. The retailer has a 12-year term limit for independent directors. Lead independent director James Cash will reach that milestone after this year.

Wal-Mart has a generous payment structure for its directors which has a base compensation valued at $175,000 paid in shares and an annual cash retainer of $90,000. There are additional fees earned for leadership roles. Penner, as non-executive chairman earned $200,000 with payment split evenly between shares and cash.

Following are payments received by Wal-Mart’s director’s last year.
• Alda Alvarez, (retiring): $62,510
• James Cash Jr.: $363,915
• Roger Corbett: $76,488
• Pamela Craig: $319,047
• Mike Duke, retired: $38,567
• Timothy Flynn: $383,364
• Thomas Horton: $317,561
• Marissa Mayer: $266,808
• Greg Penner: $468,976
• Steven Reinemund: $289,787
• Kevin Systrom: $288,978
• Jim Walton (retiring): $45,903
• Rob Walton: $268,978
• Steuart Walton: $226,901

Wal-Mart Stores CEO Doug McMillon said given the company’s ongoing investigation related to alleged violations of the Federal Corruption Practices Act a number of directors have spent more time on corporate governance issues which drove up their compensation. Flynn, Horton and Cash comprised the audit committee who met 12 times last year and had oversight of the FCPA internal investigation.

The other committees met between one and six times last year. The Board met five times last year as a group. The company said its directors attended 98% of the meetings of the group and their respective committees. Nine out 10 nominees for this year had perfect attendance, according to the filing.

RELATED PARTY TRANSACTIONS
The company also noted several related party transactions. Following are some of those.

On Sept. 19, 2016 Wal-Mart acquired Jet.com with Jet becoming a wholly-owned subsidiary of the retailer. Marc Lore, founder of Jet, received $477 million in cash for his interest in Jet. Of this amount, approximately $80 million was paid following the closing of the transaction. The remaining approximately $397 million will be paid to Mr. Lore over the five year period following the closing date of the transaction, subject to Mr. Lore remaining employed by Wal-Mart during such period.

If Wal-Mart terminates Lore’s employment without cause, or if he resigns for good reason, Lore will continue to receive the payments over the five year period following the closing date of the transaction. His equity payment consisted of restricted stock units for 3,554,093 shares of Walmart stock vesting over the five year period following the closing date of the transaction, subject to his continued employment during such period as further discussed.

Wal-Mart also does business ($350,000 annually) with Some Spider Inc., an internet marketing company in which Lore is a minority owner (20%). The retailer said it cannot estimate the dollar value the Lore benefits from this association.

McMillon has several relatives employed at the retailer’s corporate offices and with vendors with which do business with Wal-Mart. Lori Haynie, his sister, works for Mahco, which did about $21 million of business with Wal-Mart last year. The retailer said it plans to purchase similar sporting goods products from Mahco this year.

McMillon’s brother-in-law, Greg Bray, is employed as management in the retailer’s finance department. Bray earned total compensation of more than $361,500 last year. This year he may receive compensation and other benefits in amounts similar to or greater than those he received during fiscal 2017. Nichole Bray, a management associate in the company’s Information Systems Division, is the sister-in-law to McMillon, Last year she earned $229,400 in total compensation. Her pay should be similar for this year as long as she remains employed.

Arvest Bank, owned by Jim Walton and other members of the Walton family made payments of $310,000 to Wal-Mart last year for leased space in stores where it runs bank branches. For this year the company said banking leases to Arvest should generate about $220,000 for Wal-Mart. These leases are not awarded on a competitive-bid basis. Jim Walton is the father of director Steuart Walton.

NON-COMPANY SHAREHOLDER PROPOSALS
• Proposal No. 5
Requests the board to adopt an independent chairman. The proposal said the policy should be implemented without violating any contractual obligation and compliance could be excused if not independent director is available or willing to be chairman. The Wal-Mart board asked shareholders to vote against this proposal saying its independent directors chair all the governance committees.

• Proposal No. 6
Requests the board extend Proxy access to shareholders so they have access to nominate board candidates of their own choosing. The Wal-Mart board is also against this proposal.

• Proposal No. 7
Asks the board to consider appointing an Independent director with environmental expertise. The Wal-Mart board opposes the proposal.

“Our Board currently has one member with significant expertise in environmental issues. Rob Walton, retired Chairman of the Board, currently serves as the chair of the executive committee of the board of directors of Conservation International, and he is also the co-chair of the Arizona State University Global Institute of Sustainability,” noted the Proxy.