Along with a quarterly earnings report that the market didn't exactly like, Whole Foods Market (Nasdaq: WFMI ) announced some changes to its pay structure for executives. All in all, it's an interesting example of how Whole Foods may sometimes have to be like everybody else -- and how ultimately, it's so often not.
Whole Foods Market's salary caps for executives are well known. The company said it's raising its salary cap for executives to 19 times the average employee's salary, from 14 times, for a cap at $608,000 (not including stock options and other employee benefits). This is the first hike in salary cap since 2000, and the company said that it is to help it remain competitive in retaining its executive team. When I wrote about Whole Foods' most recent earnings, I acknowledged that with competition mounting from everybody from Trader Joe's to Wal-Mart (NYSE: WMT ) , it would certainly make sense that other grocers would have a mind to try to pilfer executives from Whole Foods.
Of course, Whole Foods' policy is still pretty employee friendly, considering the fact that executives often make many times that of their average employees -- not to mention CEOs. In fact, in 2005, the average CEO pay was $10 million to $15 million (last spring, I wrote about the idea of insane CEO pay).
Speaking of CEOs, though, Whole Foods also announced that CEO and founder John Mackey's annual salary will only be $1 starting in January. Mackey said that he has reached a point in his life where he'd rather not work for money and would rather work "simply for the joy of the work itself and to better answer the call to service that I feel so clearly in my own heart."
Mackey wouldn't be the first CEO in recent years to take $1 in pay. Other high-profile examples include Google's (Nasdaq: GOOG ) CEO and co-founders, Yahoo!'s (Nasdaq: YHOO ) Terry Semel, and Apple's (Nasdaq: AAPL ) Steve Jobs. Of course, the $1 salary stunt is a bit deceiving. (And some Fools have made no bones about that fact -- one Fool thinks Apple's pretty rotten given the recent options scandal.) These guys still receive stock options and equity compensation, and it's no secret that these folks usually make millions through stock sales.
There's no doubt John Mackey has made some serious fun money off Whole Foods regardless of modest base salary -- as of the latest proxy statement, Mackey may have only owned 1% of the company's shares, but at the stock's current price, beaten down as it may be, they're worth about $29 million. (Last December he sold 13,498 shares for a cool $2 million, for example, so suffice it to say there's little reason to worry that he'll be Dumpster diving outside Whole Foods stores anytime soon.)
Stock options grants is where Whole Foods' announcement gets more unusual, though. (Keep in mind, too, Whole Foods also grants the lion's share of its stock options to employees other than the management team.) Starting in January, any stock options Mackey would have been eligible to receive will be directed to the company's two charitable foundations, The Whole Planet Foundation and The Animal Compassion Fund. And given Mackey's decision to forego salary, the Board has decided to direct $100,000 per year to a new fund, The Global Team Emergency Fund, which is meant to help the company's team members when disaster strikes.
Working for the joy of it may sound to some like crazy talk when it comes to leading an aggressive and competitive company. (Although maybe similar motivations are becoming less unusual -- Craig Newmark of craigslist recently scoffed at the idea of a pricey buyout.) However, one thing that I find appealing about Whole Foods Market is that John Mackey is not just some guy the company found to lead the company -- he's the guy who has had a large hand in architecting the company and seems to have real passion for the business and how it can both excel financially and do good in the world. His path often seems to diverge from that of most CEOs, but this wouldn't be the first time this innovative company broke with tradition.
Hungry for more? See the following Foolish articles:
- Jeremy MacNealy was the Fool on Call for Whole Foods' conference call.
- I said hang on to Whole Foods after the recent panic.
- Why I think John Mackey is a Most Foolish CEO.