WHOLE FOODS 

Whole Foods executives set to make millions after deal with Amazon closes 

CEO John Mackey’s shares are worth more than $40 million, documents show.

Posted July 20th, 2017

When Amazon.com completes its $13.7 billion purchase of Austin-based Whole Foods Market -- likely before the end of the year, the companies have said - some of the Austin-based organic grocer’s executives  are expected to leave the company. 

But if that occurs, they won’t be leaving empty-handed. 

As part of its proxy statement filed with the U.S. Securities and Exchange Commission on July 7, Whole Foods laid out how much money some of its executives would walk away with if they do not remain with the company after the buyout. The total amount is about $19.9 million. These “golden parachute” figures, a common practice when two companies merge, demonstrate the executives’ value within Whole Foods despite the issues that surrounded them before the deal with Amazon. 

The executives listed as being in line for golden parachute compensation are Chief Executive Officer John Mackey, director and former co-CEO Walter Robb, senior advisor and former chief financial officer Glenda Flanagan, new CFO Keith Manbeck, president and chief operating officer A.C. Gallo, vice president of operations David Lannon and chief information officer Jason Buechel.

Most of the executives’ compensation would be based on cash payments from severance pay and bonuses, as well as other benefits and the value of their holdings in certain Whole Foods’ stock, with the value being determined by the $42 per share amount Amazon agreed to pay Whole Foods to buy the company.

Severance pay would be equal to three times the sum of the executives’ annual base salary and bonuses would be the average of the last three annual bonuses paid to each executive, the proxy statement says. 

Below is an interactive look at the executives and their payouts. Click on each button for more information:

Photos courtesy of Whole Foods Market. Interactive made by Sebastian Herrera/Austin American-Statesman 

No figures are listed for John Mackey. This is likely because Amazon has said Mackey will remain as CEO of Whole Foods after the buyout. 

Whole Foods declined to comment regarding Mackey or the golden parachute figures. 

Mackey currently owns about $41 million worth of Whole Foods’ shares (at $42 per share), according to a 2014 filing with the SEC, the latest filing found on Mackey’s ownership. 

The top earner of the executive group would be Buechel, who has only been with the company since 2013 but would receive a significant amount just from a non-compete payment. Buechel would be paid about $5.7 million ($2.35 million in severance, $150,970 in prorated annual bonus and $3.2 million in accelerated non-compete payment), along with $529,957 in equity and $4,680 in benefits. 

Gallo would be the next highest earner. He has been with the company since 1992. Besides his role as chief operating officer, he has served as the Northeast Region’s vice president and as regional president. Gallo would be paid about $2.57 million in cash ($2.42 million in severance, $150,970 in prorated annual bonus), as well as $1.24 million in equity and $17,478 in benefits. 

CFO Keith Manbeck has only been with the company since May, when Whole Foods overhauled its leadership team. Yet he is set to earn $3,24 million in cash and $540,200 in equity, according to securities filings. Unlike his peers, Manbeck’s cash figure is derived from about $2.9 million in lump sum cash payments and $266,667 the company would pay because Manbeck forfeited equity awards at a previous employer.

Glenda Flanagan, who has been with Whole Foods since 1988 and worked as CFO before being replaced by Manbeck, would walk away with about $2.57 million in cash ($2.42 million severance, $150,970 in prorated annual bonus), along with $525,765 in equity and $4,158 in benefits. 

VP of Operations David Lannon would receive $2.57 million in cash ($2.42 million in severance, $150,970 in prorated annual bonus), as well as $382,710 in equity and $13,338 in benefits. Lannon worked at Bread and Circus before it was acquired by Whole Foods in 1992. He has served in several roles, including as president of the northern California region. 

Equity for each executive other than Manbeck reflects both their employee stock option shares , as well as their restricted stock shares. Employee stock option shares are purchased for a certain amount at a predetermined price for a specific period of time, while restricted stocks are unregistered shares of ownership that are nontransferable. Both stocks are only given to specific employees of a company. 

In Manbeck’s case, his equity is broken up between employee stock option shares and restricted stock unit awards, which are funds offered by employers through stocks and are not received immediately but after certain requirements in performance and time being employed. 

Walter Robb, who served alongside Mackey as co-CEO from 2010 until last December, is receiving $55,760 in golden parachute compensation, all derived from employee stock option shares, according to the securities filings. Whole Foods did not clarify why no other golden parachute compensation was listed for Robb.

February filing with the SEC indicates Robb holds about $19 million worth of Whole Foods stocks (at $42 per share). 

Ricardo B. Brazziell/American-StatesmanWhole Foods CEO John Mackey

While the golden parachute figures might be interesting, most Whole Foods’ shareholders really only care about what price they’ll get for their shares when the Amazon deal closes, said Brian Yarbrough, a market analyst with the investment firm Edward Jones. 

"Shareholders are getting $42 per share anyways, so the golden parachute doesn't really impact them," Yarbrough said. "(Price per share) is where their interests are aligned, not getting caught up in golden parachute numbers.

"If you look at how Whole Foods has structured their pay, they have not had a management team that has shown greed. It's not like you saw excessive pay for executives."

Yarbrough referenced a salary cap Whole Foods has said it has for its executives, with Mackey reporting years ago that executives can not earn more than 19 times the average employee salary, a figure far below other companies. Years ago, Mackey also announced he would only accept $1 in salary per year. 

If and when they do leave, these Whole Foods executives would be departing after leading the company through one of its most tumultuous times. 

Whole Foods’ leadership replaced almost half of its board of directors in May after pressure from high-profile shareholders such as Jana Partners, which publicly questioned Whole Foods’ brand development and strategy. Jana Partners on Wednesday said in a filing with the Securities and Exchange Commission that it has exited its position on Whole Foods and no longer has any holdings on the company.  Previously Jana owned about 26 million shares, giving it a more than 8 percent stake in the grocery chain.

In recent years, Whole Foods has struggled to fend off competitors’ increased use of organic food offerings, as well as its high-price reputation.  Whole Foods promised to improve technology, centralize its buying and begin a loyalty program for customers. 

In early April, Whole Foods representatives contacted Amazon after seeing media reports that the e-commerce giant had previously looked at acquiring the company. By the end of the month, Mackey, along with other senior managers, met in Seattle, where Amazon is based, with Amazon CEO Jeff Bezos. 

On May 23, Amazon sent Whole Foods a written offer to buy the company for $41 per share. After Whole Foods countered with an offer of $45 per share, the two companies settled on $42 per share. The deal, which still has to be approved by shareholders, was announced on June 16. 

If it goes through, Amazon will take ownership of the more than 450 Whole Foods stores and add the grocer’s roughly 87,000 employees. 

Whole Foods began as a single store on North Lamar Boulevard in Austin in 1980.

 

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