No penny-pinching at Family Dollar

Family Dollar Stores Inc. may have been looking to prevent its flock of penny-pinching consumers from migrating to big discount retailers like Wal-Mart Stores Inc. with its move to merge with Dollar Tree Inc., but the deep-discount firm didn’t penny-pinch when it came to making payouts for CEO Howard Levine, who is set retain his post once the merger is complete.

In one of its nine filings yesterday related to the proposed merger, Family Dollar Stores disclosed that Levine is in line to get a potential $5 million in payout, including salary, bonus and restricted stock units.

Here’s the relevant part of the filing that details the potential payout:

“Pursuant to the Retention Letter, following the Effective Time, Mr. Levine will (a) receive an annual base salary of at least $1,150,000, (b) receive an annual target incentive opportunity under the terms of Dollar Tree’s Management Incentive Compensation Plan of at least 100% of his annual base salary, which will be based in part on performance measures related to the Company, (c) receive, for periods of his employment following August 31, 2015, an annual long-term performance plan grant with a target opportunity of $600,000 and an annual restricted stock unit performance based grant of $2,000,000 (with the first such grants to be made no later than Dollar Tree’s regular 2016 grant cycle) and (d) be eligible to participate in the other compensation and employee benefit plans applicable to similarly situated executives of Dollar Tree. Dollar Tree has also agreed that it will, following the Effective Time, reimburse reasonable legal fees incurred by Mr. Levine in connection with the negotiation of the retention letter, up to a maximum of $45,000.”

We don’t know what Levine made in 2014 as the company usually files its compensation proxy in December but what we do know is that his total compensation for 2013 was valued at $5.45 million, according to the company’s proxy filed last December.

Keep in mind that the $5 million potential payout in connection with the merger we noted above does not include other stock and option awards, cash bonus award and “all other compensation” award, all of which were part of his 2013 compensation amount.

We don’t find it surprising that Levine is set to get such a huge payout, considering that his new boss, Dollar Tree CEO Bob Sasser, snagged a $10 million “special one-time retention award” just two years ago. When companies have a history of providing such largesse to their executives, they will be hard pressed to let go of such practices.

What is galling is that Levine is getting huge payout despite a lackluster performance by the company, with falling comparable store sales and tumbling profits. We wonder how Levine, and the acquirer, Dollar Tree, will justify the generous payout for him, as well as the $30,000 salary boost for Levine from his 2013 amount of $1.12 million.