Rite Aid Loses Compensation Vote on ‘Pay-For-Failure’ Bonuses
(Bloomberg) -- Rite Aid Corp. shareholders rejected the firm’s executive-compensation program amid criticism that the pharmacy chain paid special awards tied to mergers that didn’t work out.
About 84 percent of shares cast at Rite Aid’s annual meeting Tuesday denounced the pay program, according to Michael Pryce-Jones, senior governance analyst at the International Brotherhood of Teamsters, which criticized the board’s compensation decisions. The resolution was non-binding.
“After today’s shareholder meeting, it is clear CEO Standley must rebuild trust among Rite Aid investors and workers alike,” Ken Hall, the union’s general secretary, said in an emailed statement. “This startling lack of accountability and executive enrichment not only exposes a cultural void at the top, but also erodes morale among rank-and-file employees.”
Rite Aid’s board last year approved retention payments for Chief Executive officer John Standley and his top lieutenants following the unsuccessful merger attempt with Walgreens Boots Alliance Inc., an outcome that was outside their control, the firm said in a Sept. 27 proxy statement.
The company paid additional retention grants this year to a group of senior executives, including the CEO, after another planned merger -- this one with Albertsons Cos. -- collapsed in August. In a letter this month to Rite Aid shareholders, Hall lambasted the payments, calling them “pay-for-failure retention bonuses.”
The retention grants were made partly as a result of the uncertainty and impact of the prolonged merger attempts and continued pharmacy reimbursement challenges, Rite Aid said in the filing. Pete Strella, spokesman for the Camp Hill, Pennsylvania-based firm, didn’t immediately respond to a request for comment.
Hall also criticized an equity grant awarded to Standley linked to the successful integration of benefits manager Envision Pharmaceutical Services Inc., which Rite Aid bought in 2015. Rite Aid has written off more than a quarter of the purchase price in goodwill impairments, Hall said in the letter.
At the meeting, Rite Aid investors also approved a proposal asking the board to produce a report on governance changes made to monitor and manage risks related to the firm’s role in dispensing opioids, and a proposal requesting a report on sustainability efforts. The board had asked shareholders to reject the resolutions.
Rite Aid shares gained 5.26 percent to $1.12 at 2:04 p.m. in New York. The stock has plummeted more than 70 percent since Walgreens Boots Alliance scrapped its planned takeover and instead bought 1,932 of Rite Aid’s stores, leaving behind a far smaller company with a more uncertain future.
Following the failed deal with Albertsons, Rite Aid’s directors stripped Standley of the chairman role to “enhance the board’s governance oversight” and nominated several new directors, according to the filing. The board also reaffirmed its confidence in the CEO.
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