Baby steps….

Discount retailer Family Dollar (FDO) took a positive step in 2004 to distance itself from a cozy business relationship with the brother of its former chairman. Last year, I noted that the company has a history of being family friendly and questioned its $15.3 million deal with the CEO’s uncle. But this year — at least judging by the recent proxy — the company seems to have eliminated Uncle Sherman’s role. Unfortunately, it was only a baby step.

Family Dollar increased its dealings with Eric Lerner, the brother-in-law of CEO Howard Lerner. In 2003, Eric Lerner sold $723,000 worth of merchandise to Family Dollar. This past fiscal year, it increased to $1.18 million — a more than 60% increase — according to the recent proxy. Also troubling was the company’s additional disclosure on the retirement benefits paid to former Chairman Leon Levine (CEO Howard’s dad). In the current proxy, the company provides additional details on the retirement deal it entered into with Leon two years ago. That agreement, which the company valued at $1.285 million, provides for office space for the elder Levine, as well as an undefined number of assistants and associates, continuing health and other insurance benefits and 30 hours of access to the company’s corporate aircraft.