Reporting on Ruels Rule

In all the reporting in this issue on compensation paid to public company executives, we had one leftover tidbit.

We share that now: Greg Ruel, a senior researcher at GMI Ratings of New York, which studies and reports on the performance of public companies, noted that Wal-Mart Stores Inc.’s Mike Duke received a bonus of $2.8-plus million despite the company’s failure to reach performance targets. These targets are pre-established as part of a company’s cash incentive plan.

“At Wal-Mart, the company came up short on three out of four of its operating income targets for the 2012 compensation year,” Ruel observed. “However, thanks to incredibly low thresholds, including Operating Income Increase targets of 0 percent for both Wal-Mart U.S. and Sam’s Club, CEO Michael T. Duke still received a cash bonus of nearly $3 million. Actual performance included Total Company Operating Income of 3 percent against a target of 5 percent. Last year, the company’s Total Company Operating Income was 4.8 percent.”

“Companies lowering bonus thresholds so it’s easier for executives to make bonus are essentially missing the point,” Ruel said in an email to Arkansas Business. “These performance metrics should be challenging and, when met, executives will be paid for that success.”

Translation? A public company can find any number of people who’ll fail to meet expectations for a lot less than $2.9 million.