One disgruntled shareholder is taking issue with the big bucks and generous stock grants earned last year by Floyd Hall, chief executive of
, the embattled retailer.
According to a proposal buried in Kmart's proxy statement, Edward George, owner of 10,000 shares, recommends halting executive pay raises and option grants until a dividend is restored. Kmart has not paid a dividend since December 1995, when the company was on the brink of filing for bankruptcy protection. In documents filed with the
Securities and Exchange Commission
, George argues that "the stockholder is the first casualty
in an economic downturn and the last to benefit in an upturn."
Kmart would not comment on the proposal, but in the proxy it suggests shareholders vote against the measure at the company's annual meeting May 20 in Detroit. George could not be reached for comment.
The company saw no issue in paying Hall a hefty $2.75 million in 1996. That package included a $1.75 million bonus that was more than double the target amount. Hall also was granted options to purchase 900,000 common shares. Having joined the company in mid-1995, Hall earned just $1.6 million that year.
Kmart's board pointed to Hall's success in cutting expenses, closing 200 unprofitable stores and steering the company through a capital restructuring as reason for his monetary reward. As for enhancing shareholder value, they argue, Kmart's stock gained 38% in 1996, compared with 19% for the
Despite the stock-price gain, Kmart is not exactly knocking the cover off the ball. The company lost $220 million last year.
What do some of Kmart's biggest shareholders think about the dividend proposal? Not much, apparently.
Rena Brennan, a spokeswoman for
, says the company declines to comment on proxy issues. Ditto for
Dodge & Cox
But Anne Hansen, deputy director of the
Council of Institutional Investors
, a shareholder rights group composed of pension funds, says while she is unsure how her members will vote, winning enough support to pass the proposal is not necessarily the point.
"The whole purpose is to show dissatisfaction," she says.