Rite Aid shareholder proposes ‘clawback' resolutionTim Stuhldreher
A Rite Aid Corp. shareholder plans to present a shareholder resolution at the company's annual meeting calling for greater board control over executive compensation.
Under investor Steve Krol's proposed "clawback" provision, bonuses awarded to senior executives based on "a single event or transaction" would be paid in stock or stock options and vested over five years, provided Rite Aid stayed profitable each year.
In addition, the board would have the right to recover compensation from a senior executive who failed to prevent managers they oversee from causing major financial loss, damaging Rite Aid's reputation or engaging in "conduct cause for termination," the resolution says.
Rite Aid will allow the proposal to be presented, spokeswoman Ashley Flower said, but she had no further comment.
A clawback resolution would have prevented top Rite Aid executives from receiving bonuses for engineering the company's 2007 purchase of the Brooks and Eckerd drugstore chains, Krol wrote in a supporting statement. The deal massively increased Rite Aid's debt, with little upside, and critics have judged it a strategic blunder.
Then-CEO Mary Sammons, now board chairwoman, received $1.5 million for closing the deal, and four other executives received sums ranging from $120,510 to $747,563, according to U.S. Securities and Exchange Commission filings.
"Had a 'hold back policy' been in place … these senior executives would have appropriately received no financial benefit. Additionally, it would have made it less likely that top brass would continue to cultivate a culture of excessive risk-taking," Krol wrote.
Krol previously received approval to include a resolution in Rite Aid's annual proxy statement recommending that future board nominees have no pre-existing ties to Rite Aid or its senior management, except as required by earlier merger agreements.
Rite Aid initially opposed that resolution, but the SEC ruled the company was not entitled to exclude it from a vote.