Safeway Case Study

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Register to read the introduction… They grew significantly faster than Kroger during this period. Their strategy is consistent with an upscale supermarket that focuses on the ambiance of the store.

Safeway offers bonus compensation for an increase in stock price. This can be motivating for employees to do good for the company, however, the increase in the stock price is a very general goal, and somewhat more difficult to achieve. The company could have a reduced stock price even if its profits are up. Company employees or executives should have compensation tied to specific goals that are easily measurable and can be completed. That way, the employees and executives will be in control of their compensation, and won’t be affected by arbitrary stock fluctuations. To have their corporate package aligned with their overall strategy, Safeway will need to introduce compensation bonuses for expanding the market share by opening new store
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Whole foods also offer a maximum executive compensation equal to 19 times the average employee salary. Executives had the right to take time off without pay, therefore, increasing the amount of bonus they could be paid within the cap. I don’t think that this compensation strategy is very motivational. It essentially gives executives motivation to take time off work and still receive the same compensation. The stock compensation for Whole Foods is too arbitrary. They should have specific financial metrics that executives should try and meet, and receive stock compensation based only when those metrics are successfully met.

2. How appropriate is the compensation provided to board members at each company? Comment on levels of payment as well as use of cash and non-cash incentives.

Kroger:
Kroger offered it’s executives middle of the road compensation relative to its competitors. Perks of being an executive included personal use of company airplanes, life insurance and reimbursement of up to $4,500 for financial planning.

Safeway:
Safeway offered the highest compensation relative to its competitors. The Safeway executive perks included limited use of company airplanes for personal use, company-provided automobile for commuting and business purposes, home security system, cost of physical examinations up to $2,500 and life

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