DEF: Winmark Sets Annual Meeting Agenda, Addresses Executive Pay Gaps

Winmark Corporation announces its 2026 Annual Meeting of Shareholders to vote on director elections, executive compensation, and auditor ratification, while addressing executive pay alignment.

Summary

• The Annual Meeting of Shareholders will be held on April 22, 2026, to consider setting the Board of Directors at seven members, electing seven directors for a one-year term, an advisory vote to approve executive compensation, and ratifying Grant Thornton LLP as the independent registered public accounting firm for the 2026 fiscal year.
• Shareholders of record at the close of business on March 2, 2026, are entitled to vote at the meeting.
• The executive compensation plan is designed to attract, retain, and incent high-quality executive management through a base salary, an annual bonus opportunity (capped at 100% of base salary), and two semi-annual stock option grants.
• Named Executive Officers (NEOs) have significant long-term equity ownership, with the Chair and CEO owning stock equal to 64 times his base salary, the CFO 71 times, and the COO 24 times as of March 2, 2026.
• Total shareholder return for the 23-year period from fiscal 2003 through fiscal 2025 approximated 19.0% per year.
• Shareholder support for the advisory 'Say-on-Pay' vote was 94.8% in 2025, 95.0% in 2024, and 80.2% in 2023.
• For 2025, the Chair and CEO, CFO, and COO earned 99.3%, 95.5%, and 97.8% of their annual bonus opportunity, respectively, driven by factors including royalty revenue up 5.8%, operating income up 3.1%, earnings per share up 3.8%, store count up 2.1%, 63 new franchise agreements, and a return on assets of 161%.
• The CEO's total compensation for fiscal year 2025 was $2,108,124, and the CEO pay ratio to the median employee was 21.9 to 1.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing positively due to strong historical shareholder returns, a compensation philosophy aligned with long-term ownership, and robust corporate governance. The acknowledged executive compensation gap is a concern but is being actively monitored by the Compensation Committee.

Positives

• Strong historical shareholder support for the executive compensation program, with 94.8% in favor in 2025.
• Executive compensation plan is designed to encourage long-term investment and aligns NEO interests with shareholders through significant equity ownership (CEO 64x base salary, CFO 71x, COO 24x).
• Achieved an impressive total shareholder return of approximately 19.0% per year from fiscal 2003 through fiscal 2025.
• The management team demonstrates long tenure, with the CEO having 23 years, CFO 17 years, and COO 31 years of service.
• The CFO received a $75,000 discretionary bonus for exceptional performance in executing the successful and profitable exit from the leasing business.
• The Board of Directors is comprised of a majority of independent directors, enhancing oversight and governance.
• All directors attended at least 75% of the Board and committee meetings during fiscal 2025, indicating active engagement.

Negatives

• The CEO's total compensation is materially below the market median compared to the peer group (68% of base salary, 31% of bonus potential, 26% of equity, and 37% of total compensation).
• This compensation gap is identified as a potential near-term and long-term risk for the Company and its shareholders.
• Shareholder engagement levels were lower in 2025 and 2024 compared to 2023.

Risks

• The CEO's compensation being materially below the market median compared to the peer group could potentially become a near-term and long-term risk for the Company and its shareholders.
• The company's at-will employment policy for NEOs, without employment contracts or pre-determined severance, preserves flexibility to make changes if any NEO is underperforming expectations, implying a potential for management turnover if performance issues arise.

Future Outlook

The Compensation Committee and CEO discussed strategies to remediate the identified compensation gaps and enhance retention for the Named Executive Officers to ensure flawless execution of the Company's operational plan for the next five years. Future adjustments, if any, will focus on base salary and equity compensation discrepancies, while maintaining the existing 100% bonus cap.

Management Comments

• "We believe the plan has and continues to benefit our shareholders because our NEOs clearly understand their goals and the drivers of both shortand long-term compensation."
• "Your management team has significant ownership in Winmark — not due to a requirement but by their individual choice."
• "We do not utilize compensation consultants as we do not believe that spending shareholder funds on such services would improve NEO alignment or enhance share price performance."
• "Mr. Heffes and the Committee feel strongly that the current compensation structure has worked for the Company and its shareholders and do not believe that major structural changes are necessary."

Industry Context

StockSavvy.ai notes that Winmark's executive compensation structure, with its emphasis on significant long-term equity ownership and a conservative 100% annual bonus cap, distinguishes it from many public companies that often rely on compensation consultants and higher bonus multiples. While this approach has fostered strong management alignment and impressive historical total shareholder returns, it has also resulted in the CEO's compensation being materially below peer group medians. This divergence could present retention challenges in a competitive talent market, even as the company's peer group, comprising consumer-oriented public companies, resale companies, specialty retailers, and franchisors, reflects its diverse business model.

Comparison to Industry Standards

• Winmark's CEO compensation is materially below the market median when compared to its peer group, which includes Regis Corporation, The RealReal, Inc., Academy Sports and Outdoors, Inc., Dine Brands Global, Inc., Sleep Number Corporation, Savers Value Village, Inc., The Children's Place, Inc., European Wax Center, Inc., ThredUp, Inc., and Urban Outfitters, Inc.
• The CEO's base salary was 68% of the peer group median, bonus potential was 31% of the peer group median, equity compensation was 26% of the peer group median, and total compensation was 37% of the peer group median.
• The peer group's CEO bonus potential is approximately 240% of base salary, whereas Winmark's CEO bonus is capped at 100% of base salary, reflecting a more conservative approach to short-term incentives.

Management Changes

Corporate Governance

Related Party Transactions

• There were no reportable related party transactions in fiscal 2025.
• The Board of Directors has a formal written related party transaction policy, requiring Audit Committee approval for any such transactions before commencement, or ratification/amendment/termination if discovered unapproved.

Stakeholder Impact

• Shareholders: Directly impacted by voting on directors, executive compensation, and auditors. Benefit from the company's long-term management alignment and historical total shareholder return. Potential risk from the CEO's compensation being below market median could affect future management retention and performance.
• Employees: Benefit from 401(k) matching contributions and optional annual contributions to retirement accounts. Executive officers receive higher maximum life insurance payouts ($250,000) compared to other employees ($200,000).
• Management: The executive compensation structure is designed to attract, retain, and incent high-quality management, with significant equity ownership aligning their interests with shareholders. The identified compensation gap for the CEO is being monitored for potential remediation.

Next Steps

• Shareholders will vote on Proposal #1 to set the number of members of the Board of Directors at seven.
• Shareholders will vote on Proposal #2 to elect seven directors to serve for a term of one year.
• Shareholders will cast an advisory vote on Proposal #3 to approve executive compensation.
• Shareholders will vote on Proposal #4 to ratify the appointment of Grant Thornton LLP as the independent registered public accounting firm for the 2026 fiscal year.
• The Compensation Committee will continue to review the CEO's compensation to ensure the discount to the peer group is monitored and remediated over time.
• The Compensation Committee and CEO will discuss retention-related strategies for the CEO and other Named Executive Officers to ensure flawless execution of the Company's operational plan for the next five years.

Key Dates

Recommendation

The filing is a routine proxy statement for an annual meeting, providing transparency on corporate governance and executive compensation. While the company demonstrates strong historical performance and a compensation philosophy aligned with long-term shareholder value, the identified risk of the CEO's compensation being materially below market median warrants monitoring. There are no immediate catalysts for significant price movement, suggesting a 'hold' position as investors await further operational updates and observe how the compensation gap is addressed over time.

Keywords

Winmark, SEC filing, proxy statement, annual meeting, executive compensation, corporate governance, board of directors, stock options, shareholder vote, independent auditors, financial performance, CEO pay ratio, franchise, retail