Wal-Mart: Thanks for the Bonuses, But…


Store workers are glad for the extra cash, but critics say the bonuses don't make up for the retailers' track record of poor compensation

There's going to be a few extra beers going around at Rosetta Brown's home in Chicago tonight. The hardworking 45-year-old mother of five just got her $616 bonus check from Wal-Mart Stores (WMT), her highest annual payout since starting work there nine years ago. The best part is that her husband, Robert Ollison, a custodian at the nearby Wal-Mart store, also got a bonus of $1,935. The couple hopes to use the money for a down payment on a new car.

Brown, and 1 million of Wal-Mart's hourly workers, will for the first time in the company's history also be eligible for quarterly, rather than the annual so-called My$hare, bonuses. "More frequent awards should drive increased performance, which impacts business results. Going to a quarterly bonus program could also serve as a recruiting tool for associates," says Sarah Clark, a spokeswoman for Wal-Mart. Wal-Mart says it awarded $529.8 million in bonuses on Mar. 22 to a total of 813,759 Wal-Mart and Sam's Club hourly workers in the U.S—80% of its 1.04 million hourly workers. The retailer employs 1.34 million people in the U.S.

Too Little, Too Late?

Bonuses are based on the performance of each store. Workers receive the check if their stores meet targets for sales, profits, and inventory turns. Some employees receive bonuses of thousands of dollars, others get nothing. In addition, the 13,400 workers who have worked at Wal-Mart for more than 20 years are rewarded with one week's extra pay.

Still, some of the employees' happiness was tinged with a little irony. Cynthia Murray, who works at the Wal-Mart store in Lauren, Md., says the store needs to give back to its associates and that the $1,000 deposit in her bank account is the best bonus that she has seen in her seven years of employment there. "But they should reinstall the merit raises for people who have worked there for many years and make health care more affordable," says Murray, referring to the salary caps the company installed a few months ago (see BusinessWeek.com, 8/14/06, "The Flip Side of Wal-Mart's Pay Hikes").

Murray, 50, doesn't have health-care coverage because she can't afford it. She says that in her area, Wal-Mart's cheapest plan costs $30 per pay period with a $1,000 deductible. "It's a waste of money to pay for a plan that you can't even use," says Murray. Wal-Mart's Clark says those statements are inaccurate. She says the company offers a health-care plan at the Maryland store for $23 a month.

Critics Aren't Satisfied

Wal-Mart has come under increasing attack in recent months from politicians including Presidential hopefuls Senator Barack Obama (D-Ill.) and former Senator John Edwards (D-N.C.) because of its low pay and benefits (see BusinessWeek.com, 11/16/06, "Can Barack Wake Up Wal-Mart?"). Many politicians and labor groups have called on the company to improve its labor relations. While Wal-Mart says the bonuses are unrelated to criticism, most outsiders see the changes as part of an effort to tamp down the attacks. Wal-Mart says these initiatives are part of the "associates out in front" effort it launched last year to make Wal-Mart a better place to work.

Wal-Mart's critics say they aren't impressed by the employee bonuses. They point out that in contrast to the $650 that workers received on average, Chief Executive Lee Scott received a $3.94 million bonus for the fiscal year ended in January, 2006, part of a total compensation package of $15.7 million, excluding restricted stock awards. (The 2007 proxy hasn't yet been released.) "Wal-Mart values are so misplaced that it gives executives hundreds of millions in bonuses and then mere crumbs to associates who have had their hours cut, salaries capped, and affordable health care eliminated," says Chris Kofinis, spokesman for WakeUpWalMart.com, a union-backed group that has long been critical of the retailer.

The bonus program was originally started in 1986 by Sam Walton to give workers a way to share in the company's success. And even though many employees won't get a raise this year, the bonus check goes a long way. Across the country, Wal-Mart employees celebrated as the checks were handed out. At the Rogers (Ark.) store that met some of the inventory goals, the management staff celebrated by setting up an impromptu grill at the back of the store and cooking steaks and chicken for the staff. "The bonuses can give us a little extra money to spend on luxury items," says Larry Ferguson, 60, a full-timer who sells DVDs and music at the store.

Gogoi is a contributing writer for BusinessWeek.com.

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