35% of Retail Executives Left Empty-Handed As Bonuses Go Bust

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The current retail slump is hitting executives where it hurts: their personal wallets.

As the retail purge continues, store closures and bankruptcies roll on. And with the turmoil, people’s livelihoods are directly affected. For thousands of corporate and store employees that has meant layoffs. And senior retail executives aren’t immune either.

A research report from advisory firm Korn Ferry, out last week, shows bonuses for 2016 performance range from anemic to obsolete for most. The company looked at 40 North American retailers with sales between $1 billion and $50 billion and found that the 15 percent who received normal or better bonuses were in the minority.

Long used as carrots to incentivize performance, bonuses have shrunk to small sums for 38 percent of respondents, while another 35 percent have done away with them altogether.

The trend away from bonuses has grown steadily over the last five years. Looking back, all but 10 percent of senior retail execs received a bonus with a similar percentage the next year. In 2015, however, that number leapt to 25 percent, where it stayed through 2016.

And it’s not just bad news for those employees.

“Bonuses are typically tied to the performance of the retailer, and historically about 50 percent of retailers achieve their business plan for profits and pay executives their normal bonuses,” said Craig Rowley, a Korn Ferry senior partner. “The fact that this year only 15 percent of companies met or beat their expected profit plan and paid full bonuses to executives exemplifies the challenges facing the industry.”

[Learn which shopping center and mall properties have been hit the hardest: Store Closures Rampant? Maybe. Random? Definitely Not.]

Retailers have been squeezed by low foot traffic in malls, the shift to online shopping—which in the case of e-com pure-plays pulls money from traditional retailers—an increase in minimum wages and their comeuppance for being overleveraged.

To try to boost profits and avoid the fate of stores that have gone under or are hanging on by a thread, Rowley said retailers are trying to embrace e-commerce, which accounts for roughly 12 percent of all retail, and they’re looking to use space more wisely to reduce overhead.

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