Executive bonuses a tough sell to consumers

Opinion

Hey there, time traveller!
This article was published 05/01/2023 (676 days ago), so information in it may no longer be current.

With a new year starting, we hear announcements about bonuses in food retailing.

Metro recently announced that it offered five top senior executives $3.7 million in bonuses. This represents a four per cent increase in bonus payouts over the previous year, while Metro sales grew 3.3 per cent over the past fiscal year.

Unsurprisingly, Éric La Flèche, its CEO, saw his total compensation reach $5.4 million, up seven per cent compared to 2021. His annual bonus this year is around $1.5 million, an increase of 14 per cent compared to last year.

Alas, Metro’s statement said nothing about the compensation paid to other company employees.

Metro is not alone. Other grocers and other companies in the food sector have done the same thing. In 2021, according to Globe and Mail data, José Cil of Restaurants Brand International, Brian Hannasch of Alimentation Couche-Tard, Galen Weston of Loblaws and George Weston, Neil Rossy of Dollarama and Michael Medline of Empire/Sobeys, all working in the food sector, have without exception received larger bonuses than those announced by Metro.

There is nothing wrong with paying bonuses to executives who help a company grow and create value for its shareholders and customers. In fact, other than José Cil of Restaurants Brands International, who ranks 13th, again according to the Globe and Mail, there is no food CEO whose compensation ranks among the top 20 in the country.

Galen Weston of Loblaws is in 42nd place, Michel Medline in 61st and Éric La Flèche in 78th.

Nothing exceptional. In food, the margins are thin and the salaries are, too.

Motivating leaders and attracting the talent needed to get things done remains an asset, especially these days. But in the food sector, companies must read the proverbial room, considering what’s happening with our economy. Profits in the food industry have an incredibly sensitive moral undertone; consumers have a very different perception of bonuses because it is, above all, a question of social acceptability.

Most often, performance reviews of corporate leaders are heavily influenced by the company’s sales figures. Like everywhere else, inflation has inflated the numbers in the financial statements.

Moreover, food inflation in the country has exceeded 10 per cent for several months and greatly exceeds the general inflation rate.

Major grocers have continually been criticized by politicians, analysts and even journalists for their so-called record profits. The big food companies have been posting very good results for some time; that goes without saying. But food inflation in Canada remains one of the lowest in the world among industrialized countries.

Among industrialized economies, only Japan, China and India show lower rates than Canada. Since the food sector manages a global phenomenon, it is unwise to point the finger at supermarkets, as their profit margins have never really exceeded the profitability thresholds we see elsewhere, including in the United States.

So, for Metro and the others, announcing bonuses requires tact and, above all, empathy. Announcing bonuses to just a handful of executives during the holidays is simply ill-timed. Or the company could increase executive salaries to avoid bonuses and avoid any public outcry. If that’s not possible, there are other ways to go about it.

With these bonus announcements, the companies should publicize the steps taken to compensate other employees: all staff, not just executives. People don’t know much about Éric La Flèche, but they know Samantha, Nicole, Vincent and others who work in stores we all visit.

And they work long hours. Perhaps more than ever, it is critical to humanize food companies to demonstrate employees occupy an important place when evaluating a company’s financial performance.

In addition, these companies give generously to food banks and support various causes throughout the year. When announcing targeted bonuses, the company should also display its charitable donations and shed light on its socio-economic contributions. Again, recognizable and public empathy.

Grocers must come to terms with the fact they are experiencing a real crisis of confidence across Canada. Their image depends on every word written in press releases and every sentence spoken in front of a microphone or a camera. Their relationship with the public changed in 2022, and much the same should be expected in 2023.

» Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

» Troy Media