Kroger’s CEO Takes a Pay Cut—Salary Falls to $15.7 Million

Kroger’s 2023 financial report recently revealed that the Kroger CEO took a pay cut with a compensation package that was 18 percent less than in 2022. Rodney McMullen, Chairman and CEO of the company since 2014, took a pay cut to match the decline in operating profits and identical sales growth compared to the earlier year. The Kroger CEO’s salary and the benefits provided to senior executives are strongly tied to the annual performance of the company, and while Kroger described it as strong, there was a slight 0.5 percent decline in sales in comparison to the same time the previous year according to the Q4 financial results. 

Image: Kroger

Kroger CEO Pay Cut Reported After Middling Performance in the Fourth Quarter 

We learned of McMullen’s salary cut after hearing the details of the company’s performance in the previous fiscal year. Kroger’s 2023 financial report saw total company sales of $150 billion USD in 2023 which included $2.7 billion from the 53rd week according to PR Newswire. This meant their sales had increased by 1.1 percent compared to the previous year, where the number had stood at $148.3 billion USD. The gross margin for sales was announced at 22 percent and the FIFO gross margin rate increased 18 basis points compared to the previous year. A statement from Interim CFO Todd Foley stated that “Kroger’s 2023 results provide another proof point of the strength and resilience of our value creation model, which supported another year of strong free cash flow and net earnings growth.”

The numbers did not suggest significant growth at the organization but they still trended on the positive side. However, Rodney McMullen’s pay cut came anyway, a result of reduced compensation due to the company’s annual performance incentive falling below target. This incentive, based on Kroger’s sales growth excluding fuel and adjusted operating profit, paid out about 24 percent of its target in 2023. According to GroceryDive, in comparison to the 2023 performance, the company’s performance in 2022 was seen as “exceptional,” with the incentive program paying out almost 200 percent of its target. It’s safe to say that the Kroger CEO’s salary just a year ago was considerably higher. 

Putting the Kroger CEO pay cut into perspective, Rodney McMullen’s salary number was stated as $1.4 million USD and he received an additional $10 million USD in stock awards. The bonus, the segment of the CEO’s pay that took the biggest hit, was presented at $673,000 USD. This put the total compensation for the Kroger CEO at $15.7 million USD. In the previous year, before the salary cut, Rodney McMullen received $19.2 million USD. This number was made of a $4.1 million USD bonus, supplemented by $10.4 million USD in stock awards.

Kroger CEO Pay Cut Not an Isolated Incident

The Kroger Fiscal 2023 financial report and Rodney McMullen’s pay cut paint a picture of a business that is still doing well for itself, but it requires change to realign the company towards growth rather than stagnation. It’s also worth noting that a pay cut for a CEO and one for an employee mean very different things. A CEO’s pay cut, even when sliced dramatically, does still leave enough to live comfortably, but it does expose the company’s struggles when they are forced to admit to a pay cut.

TD Bank CEO Bharat Masrani also witnessed a 11 percent drop in his compensation bringing the number down to $9.93 million USD in 2023. The bank had a difficult year trying to resolve the First Horizon acquisition that eventually fell through and further encountered regulatory issues with the U.S. government, according to Reuters. Bank of America CEO Brian Moynihan also took a 4 percent pay cut in 2023, receiving $1.5 million USD with $27.5 million USD in stock initiative. 

BlackRock CEO Larry Fink received $26.9 million USD in the 2023 fiscal year after an 18 percent pay cut. From the Kroger CEO pay cut to the rest we identified, there are multiple reasons that result in a shaky performance by an organization. A pay cut often represents an attempt to balance resources while giving the CEO an incentive to support improvements toward better performance the following year. 

Are Pay Cuts the Solution to Layoffs?

JustCapital conducted a study to track the phenomenon of CEO pay cuts and found that in a majority of cases, the cuts only account for 8 to 10 percent of their salaries. This leads many to question why bigger CEO pay cuts aren’t enforced instead of layoffs and job termination that affect employees and it’s a fair question to ask of companies that could gain a significant profit margin by scaling back on salaries for senior management teams. Unfortunately however, CEO pay cuts do not always mean that job cuts can be avoided. 

JustCapital’s COVID-19 Corporate Response Tracker found that 28 percent of America’s 300 biggest employers saw C-suite executives take a pay cut during the pandemic, but 72 percent of them still went ahead with furloughs and layoffs. 

The numbers make it clear that when reorganization is a part of a company’s strategy, little can be done to dissuade the layoff procedures that follow. For now, the ideal outcome will surface if the job market picks back up, providing us with a fairly balanced system of incoming and outgoing employees.

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