Whole Foods Market 2005 Compensation Committee Report
The Company’s Compensation Committee is empowered to review and approve on
behalf of the full Board of Directors the annual compensation and compensation
procedures for the five executive officers of the Company: the Chairman & Chief
Executive Officer, the Executive Vice President & Chief Financial Officer, the
Executive Vice President of Growth and Business Development, and the
Co-Presidents & Chief Operating Officers. The Committee also administers the
Company’s stock option plans and Team Member stock purchase plan.
Annual executive officer compensation consists of a base salary component and
an incentive component. The Company’s publicly stated policy is to limit cash
compensation paid to any officer in any calendar year to fourteen times the
average salary of all full-time Team Members. Amounts earned in excess of the
salary limitation may be deferred to future years. However, 2004 is the last
year in which such deferral is permitted by our policy. All compensation
decisions are subject to the implementation of this policy. In addition, the
Committee considers numerous factors including the Company’s financial
performance, the individual contribution of each executive officer, compensation
practices of comparable companies and general economic factors. Stock price
performance has not been an important consideration in determining annual
compensation because the price of the Company’s common stock is subject to a
variety of factors outside the Company’s control.
The base salary levels for the executive officers of the Company were
increased 5% in calendar 2004 over calendar 2003. The most significant
determinants in the increases were the growth and financial performance achieved
by the Company.
All of the Company’s executive officers participate in an incentive
compensation plan based primarily on improvement in EVA (Economic Value Added).
EVA is a management decision-making tool and incentive compensation system that
the Company adopted and began to implement in 1999. The incentive compensation
paid to the executive officers for fiscal 2004 was based upon the incremental
improvement in the Company’s overall EVA and the number of new stores opened
within the development budget during the fiscal year. The incentive compensation
paid to the Co-President and Chief Operating Officers for fiscal 2004 was also
based on the incremental improvement in EVA achieved by the specific geographic
regions of the Company that correspond to the executive’s area of responsibility
and the number of new stores opened within the development budget during the
fiscal year in those specific geographic regions. Fiscal year 2004
incentive compensation averaged approximately 29% of the total cash compensation
earned by the executive officers.
The Company’s executive officers have also received option grants under the
Company’s stock option plan. The Committee believes that the grant of options
enables the Company to more closely align the economic interest of the executive
officers to those of the shareholders. The level of stock option grants to
executive officers is based primarily upon their relative positions and
responsibilities within the Company. Grants are made on a discretionary rather
than formula basis by the Committee.
For calendar 2004, the Committee approved a 5% increase in the base salary of
Mr. Mackey, Chairman and Chief Executive Officer of the Company, from $326,000
to $342,000. The increase was intended to recognize Mr. Mackey’s contribution
toward the significant growth of the Company and the financial performance of
the Company in fiscal 2003. The Committee was also cognizant of the
significantly higher level of base salaries paid to chief executive officers of
comparable sized companies. During fiscal 2004, Mr. Mackey was awarded options
to purchase 13,750 shares of common stock under the Company’s incentive stock
option plan.
Committee Compensation
Avram Goldberg (Chair)
Dr. John B. Elstrott
Morris J. Siegel
Dr. Ralph Z. Sorenson
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