Macy's Inc. (M) will award five top officers, including Chairman and Chief Executive Terry Lundgren, a total of nearly 1.3 million shares if the retailer's stock can outperform the shares of most of its chief rivals during the next three years.

Most of the 1.27 million shares would go to Lundgren, who would receive 666,666 shares under the "Founders Awards" program set up by the department store chain this week through its board of directors.

The Founders Awards are structured as performance-restricted stock units and vest over a period covering fiscal years 2009 to 2011, according to a regulatory filing by Macy's this week.

Relative total shareholder return reflects how well Macy's common stock does in relation to the common stocks of a 10-company peer group - including Wal-Mart Stores Inc. (WMT), J.C. Penney Corp. (JCP), Kohl's Corp. (KSS), Nordstrom Inc. (JWN) and Sears Holdings (SHLD) - assuming the reinvestment of dividends.

Macy's stock has to outperform two-thirds of the other retailers for the officers to receive their full awards. If the stock does better than between 50% and 66% of the group, the officers receive 75% of the awards. If the stock's total return does not beat half the group, no awards will be given.

The use of relative total return "eliminates the need to measure the company's success in its restructuring activities using internal standards, which may or may not be commensurate with changes in shareholder value, and instead measures success as determined by investor views as reflected in changes in shareholder value over time," the regulatory filing said.

Macy's move is "very much a pay-for-performance approach," said spokesman Jim Sluzewski.

The others beside Lundgren who would receive awards are Chief Financial Officer Karen Hoguet, Chief Administrative Officer Thomas Cole, and Vice Chairwomen Janet Grove and Susan Kronick. Each could receive a maximum of 151,255 shares.

Macy's is also taking away. The board eliminated a number of perks that senior executives and outside directors have enjoyed.

Macy's will stop providing leased cars to senior executives or auto allowances for those who use their own cars.

Also, financial counceling, a company-paid life insurance program and certain discounts on merchandise will end as of Dec. 31.

The initiatives follow Macy's posting a succession of sluggish same-store sales results and a 59% drop in fourth-quarter earnings.

The retailer is undergoing significant restructuring, including broadening its "My Macy's" initiative, which is meant to help the department store take a more local approach to its customers.

Macy's shares were recently up 1%, or 10 cents, at $9.76.

-By Karen Talley, Dow Jones Newswires; 201-938-5106; karen.talley@dowjones.com