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Wal-Mart Re Business Environment

To: Michael T. Duke
President and Chief Executive Officer
Re: Comments on various aspects of the business environment
Dear Mr. Duke:
As a newly elected independent member of Wal-Mart Stores, Inc. Board of Directors, I would like to share with you a number of observations, comments and suggestions regarding various aspects of Wal-Mart’s business environment. This memo will focus specifically upon negative and positive externalities; executive compensation decoupled
from performance; globalization; climate change; and alternative business models.
Externalities
Executive Compensation
The textual disclosure concerning executive pay within the 2009 SEC 10k filing is overwhelming.9 Comprising over 30 pages of the report, it is difficult to obtain a clear grasp of how compensation is actually determined. Some of the compensation is discretionary and much though not all of the performance metrics appear to be subjective despite the assertion that benchmarking and other means of objectivity have been applied. Numerous adjustments are made to various formulas without a clear explanation. The method of determining threshold, target and maximum incentive pay is not delineated with any degree of transparency. Total direct compensation has increased by 4 to 14.3 per cent despite the current economic turmoil (CEO compensation cannot be compared due to a change in who occupies the position). However, Wal-Mart's total revenue increased by 2.8 billion dollars and net income increased by 700 million dollars (7.4%) while common stock price declined from 56.1 to 50.59 dollars per share. 1 Recent proxy proposals by shareholders have included: a move to promotes pay for performance by setting compensation targets at or below peer group median, promoting performance-vested equity awards, and providing performance metrics and targets. This same proposal would also limit incentive components to when the Company's performance exceeds peer group median performance. A...