By and  on June 30, 1994

NEW YORK -- The Leslie Fay Cos. will continue the bankruptcy court fight for its incentive compensation plan today, after running into unexpectedly tough opposition Wednesday.

The company, which has been in Chapter 11 since April 1993, asked Bankruptcy Court Judge Tina L. Brozman to continue the hearing so it could call Michael J. Babcock, its president and chief operating officer, to testify.

Babcock will try and convince the court that the compensation plan, which could double the pay of four of Leslie Fay's top officers, is essential to the firm's well-being. The fact that Babcock was not originally scheduled to speak seemed to some observers an indication that Leslie Fay was not prepared for the level of opposition to its plan.

Leslie Fay has the backing of the creditors' and equity committees, but has run into a stiff battle with the ILGWU. The union, which is on strike against the company, is fighting the incentive plan, which includes two-year contract extensions for the four officers, and conducted a demonstration in front of the court Wednesday in protest. The extensions can be stretched to a third year if the company achieves certain operating goals.

During a contentious hearing, Alan Miller, of Weil, Gotshal & Manges, attorneys for Leslie Fay, called three witnesses who testified that without the proposed incentive plan senior officers could be pirated by other firms.

Kathryn D. Connors, Leslie Fay's senior vice president of corporate affairs, who helps determine the compensation for the company's employees, told the court the current compensation package "tends to be on the low side," compared to other apparel companies. She noted that Leslie Fay proposed the plan because it "needed a uniform system tying their goals to that of the company."

"We believe these executives are essential to the turnaround of Leslie Fay," said Connors.

Marc E. Richards, of Marcus, Montgomery, Wolfson & Burton, counsel to the ILGWU, attacked Leslie Fay's argument that it needs the plan to block other companies from recruiting the firm's executives, saying, "There's really been no evidence of that."

Brozman seemed to agree with Richards, and said, "One could legitimately question that management is likely to flee."However, Miller said one of the executives who would be affected by the incentive plan, John Ward, senior vice president and chairman of Leslie Fay's Dress and Sportswear Group, has already said he would leave if a new contract was not approved. Ward gets an annual salary of $500,000.

During the hearing, Richards also hit on the discrepancy in pay between senior Leslie Fay officers and ILGWU members, calling it a "cruel irony that these well-paid executives are seeking greater security after they reneged on the union's modest job guarantees."

Richards also criticized the need for a provision in the contracts that would provide the four senior officers with an automatic one-year extension based on Leslie Fay's performance.

Under the proposed plan, Babcock and Dubel would receive bonuses based on the size of the company's operating profit in 1994. Leslie Fay has predicted an operating profit this year of $16 million. Babcock's annual salary is $700,000 and Dubel earns $350,000 a year.

Laura H. Pomerantz, executive vice president of Leslie Fay's Theo Miles and Castleberry divisions, and the wife of its chairman, John J. Pomerantz, was another of Richards's targets Wednesday.

Richards said Pomerantz, who works without a contract, does not require a three-year contract because she is not likely to leave the company for greener pastures. She earns $500,000 a year.

"Is she leaving so quickly?" he asked mockingly. "Or is this a security umbrella?"

Meanwhile, a Leslie Fay motion regarding an incentive plan for mid-level managers was unopposed and approved by the court.

While the hearing was going on inside the court, about 50 demonstrators from the ILGWU protested outside. One demonstrator had a placard that read: "Leslie Fay -- if you can't afford us, you can't afford a raise."

Susan Cowell, a vice president of the ILGWU, said the demonstrators included 35 Leslie Fay workers from Pennsylvania, New York and New Jersey. The contingent then marched to Wall Street, where they picketed and passed out leaflets in front of the New York Stock Exchange. Those leaflets were a copy of an ILGWU ad that appeared on the Op-Ed page of Wednesday's New York Times with the headline "The Price of Corporate Greed at Leslie Fay."Referring to Leslie Fay's plan to shut down its domestic production in favor of imports in order to better compete on price, the main issue in the month-old strike, the ad says: "Searching the world for ever-cheaper sources of labor is not the kind of competition America needs. If [Leslie Fay] really wants to compete successfully in the global economy, it should modernize its facilities here in the U.S. as many of its competitors have done. But Leslie Fay wants to make a fast buck by squeezing every last drop of sweat and blood out of its workers."

The ad calls for a boycott of all the firm's labels, including Leslie Fay, Albert Nipon, Theo Miles, Kasper, Le Suit, Nolan Miller, Castleberry and Castlebrook.

The last leg of the march was at the doors of Saks Fifth Avenue, where demonstrators sought to persuade shoppers to shun Leslie Fay products by handing out leaflets that said, "Leslie Fay, shame on you!"

Cowell said Saks has been chosen as the first target of a nationwide boycott campaign against the company because "they're not the biggest customer, but they are an important customer...and are highly visible."

Commenting on the demonstrations, a Leslie Fay spokesman said: "We believe the union's energies and efforts should be directed at the bargaining table."

A spokeswoman for Saks reiterated the store's stance that it "doesn't get involved in labor disputes," and "lets its customers decide what labels it carries." Saks carries small amounts of Leslie Fay's Kasper, Castleberry and Nolan Miller lines.

Cowell said talks are ongoing with Bill Usery, the former Secretary of Labor who was brought in this week to mediate the negotiations between the union and the company. While she wouldn't comment on the content of the talks, Cowell said "we're talking and we're hopeful" that a settlement can be reached.

On this point, the Leslie Fay spokesman agreed, and said the company is also "working toward reaching an agreement." He also declined comment on the content of the talks.

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