Sears’ Retail Chief to Get $1.53 Million : Compensation: New division chairman Martinez’s 1993 package also includes long-term bonuses. Analysts say it isn’t out of line.

Sears, Roebuck & Co., which announced plans last month to eliminate thousands of jobs and close more than 100 retail stores, will pay the newly hired chairman of its retail division about $1.53 million in salary and bonuses in 1993, according to documents filed with the Securities and Exchange Commission.

Arthur C. Martinez, who was lured from Saks Fifth Avenue to head the Sears Merchandise Group last August, will receive a salary of $900,000 and an incentive bonus of $630,000, the documents said. In addition, Martinez will receive a long-term incentive bonus of $180,000 for 1992 and $270,000 in 1993--both of which will be payable in February, 1994--and options to purchase 150,000 shares of Sears common stock after Aug. 31, 1997.

Shareholder activists and executive compensation analysts said Martinez’s package is not out of line, despite the hard times at the nation’s third-largest retailer. Sears reported a $3.93-billion loss for 1992.

“This is not a pay plan that shocks my conscience,” said Nell Minow of LENS Inc., a Washington-based pension investment fund that has been active in pushing for changes in the way executive compensation is awarded. “We’ve had a lot of problems with Sears in our day. But when you bring someone into a turnaround situation, particularly in a company as profoundly troubled as the retail division of Sears, you want to give him a big payoff if he does it.”

Indeed, after announcing a massive downsizing during his first six months on the job, Martinez will be under considerable pressure to make good on his promise to boost his division’s net income by $300 million when the restructuring is completed in 1994.

And as Sears aims to focus on its core retail business, spinning off its Dean Witter financial service unit and selling its Coldwell Banker real estate subsidiary, the 52-year-old Harvard graduate’s performance will become increasingly important to the corporation as a whole.

That is one reason shareholder activists applaud the high proportion of Martinez’s compensation package accounted for by stock options and bonus incentives--though it was not immediately clear how closely the bonus payment is tied to performance.

“What we’re heartened by is that, if he does become rich out of this, it’s because he increased the value of the company to shareholders,” said Ralph Whitworth, president of Washington-based United Shareholders Assn. “And we’ve never had an argument with high pay for superior performance.”

If all goes well, said LENS Inc.’s Minow, Martinez’s pay package may yield similar results to that of Disney chief Michael Eisner. Eisner raised some eyebrows when he cashed in stock options to the tune of $197 million last December. But Minow said the sum was well-deserved given the enormous growth the studio experienced under Eisner’s guidance. “I’m a very happy Disney shareholder,” she said.

When Martinez signed the agreement with Sears in August, the firm granted him a lump sum of $450,000 in cash, 16,250 shares of common stock, and 15,000 shares of restricted stock. The company also granted him 62,500 shares of Sears common stock on Sept. 1, 1992.

In addition to the salary and stock options, Sears also said it would purchase shares worth $972,500 that Martinez held in Saks Fifth Avenue. If Martinez decides to hold the shares, Sears may loan him the money equal to the worth of the shares, the filing said.

Bloomberg Business News contributed to this report.