Former Shoppers president Pilla paid $25.5-million upon leaving Loblaw

Domenic Pilla was paid handsomely when he left grocer Loblaw Cos. Ltd. on Jan. 10.

The former president of Shoppers Drug Mart Corp., which was acquired last year by Loblaw, got a $25.5-million compensation package, including more than $15-million of "change of control" payments, the company's management proxy circular for its May 7 annual meeting says.

Mr. Pilla's payments included severance of $6.2-million, "accelerated" restricted share unit payments of $5.3-million, "accelerated" options payments of $3.5-million, as well as almost $1.7-million of "negotiated separation arrangements."

His basic salary was more than $1.1-million.

Mr. Pilla played a key role in the takeover of Shoppers and helped the chain in its transition to becoming a division of Loblaw. The grocer's $12.4-billion acquisition of the drug-store chain capped a string of major acquisitions in the intensely competitive retail sector over the past couple of years as merchants raced to take on big U.S. discounters such as Wal-Mart Stores Inc. and Target Corp.

After losing money for its almost two years here, Target Canada said on Jan. 15 it was leaving this country, filing for court protection from its creditors and unable to see its way to profitability for another five years.

Loblaw president and executive chairman Galen G. Weston said last July that Mr. Pilla would be leaving and would "like to continue his career by pursuing opportunities to lead a widely held public company."

In its circular, Loblaw said its past president, Vicente Trius, left the grocer last July with $15.2-million of compensation, including a base salary of $710,000 and more than $8.7-million in negotiated separation arrangements.

Mr. Trius was replaced as president by Mr. Weston, the scion of the Weston family, which is Loblaw's largest shareholder. Mr. Weston, who kept his position as executive chairman, said Mr. Trius was leaving for family reasons to return to his native Brazil.

In leaving, Mr. Trius negotiated changes to his compensation that entailed a cash payment of more than $3.7-million "to reflect forgone salary and bonus entitlements," the circular said. He also got grants of stock options and restricted stock units of more than $6.1-million.

Mr. Weston received total compensation of more than $5-million last year, including a $1-million base salary, almost $1.7-million in share-based awards and more than $1.3-million in incentive plans.

Loblaw's circular goes into great detail about various performance requirements for bonuses or "short-term incentive plans." It says its governance committee decided in 2014 that the bonus awarded for each performance measure cannot exceed 100 per cent of the target unless both the Loblaw earnings and sales targets have been met. This condition does not apply to the Shoppers' bonus payouts for 2014.

For example, the Loblaw earnings target for 2014 – $3.143-billion – was based on budgeted earnings before interest, tax, depreciation and amortization (EBITDA) so that "a positive (or negative) change of $26.1-million in earnings relative to the target would have a corresponding 10 per cent increase (or decrease) in the bonus amount awarded for the earnings component."

Its actual EBITDA was $3.187-billion, which meant a 116.9-per-cent payout factor of its target, with a 35-per-cent overall weighting of total performance.

No 2014 bonus amount would have been awarded for the earnings component if Loblaw's actual earnings were equal to or less than $2.882-billion, which is 90 per cent of the earnings target.

It spells out other performance metrics such as Loblaw's sales target of $33.437-billion – the grocer actually posted $33.561-billion of sales in 2014, which was a 124.7-per-cent payout factor of its target, the circular said. Other targeted measures included its implementation of a new SAP system, Shoppers' non-prescription sales, and Shoppers' prescription counts.