Top Retailers’ Pay Packages Under Pressure

Gap's Murphy takes 15 percent pay cut while Limited's Wexner sees base pay frozen.

Limited Brands Inc.’s chief executive, Leslie H. Wexner’s base salary is being frozen at its current level this year after a 10.4 percent increase in total compensation last year, while his counterpart at Gap Inc., Glenn Murphy, is taking a 15 percent pay cut.

This story first appeared in the March 19, 2009 issue of WWD.  Subscribe Today.

These were among the disclosures regarding executive pay Wednesday as Limited filed its preliminary proxy with the Securities and Exchange Commission and Gap said it was cutting the size of the board to 10 members from 13 and reducing the retainers and compensation of the surviving members by 15 percent.

Wexner, chairman and founder of Columbus, Ohio-based Limited as well as its ceo, saw his overall compensation rise 10.4 percent to $7.5 million last year from $6.8 million in 2007, but for the second year in a row he failed to qualify as the specialty retailer’s top earner. That distinction, as in 2007, went to Sharen Turney, executive vice president of the company and president and ceo of its Victoria’s Secret division, whose total compensation increased 24.4 percent to $8.8 million.

Wexner’s pay package included a salary of $1.9 million, stocks and options valued at $2.5 million and $965,000 in security services that were paid by the company. Despite last year’s increase, the ceo’s pay still did not reach the $9.4 million he made in 2006.

Wexner also controls 56.9 million shares of the company’s stock, or 17.6 percent of those outstanding. Limited’s stock rose 2.9 percent Wednesday to $8.55, putting the value of his stake at more than $486 million. Still, shares are 46.6 percent below their year-ago close and were off 56.6 percent during the last fiscal year ended Jan. 31.

Turney’s take included a salary of $1.2 million and stocks and options valued at $3.9 million. She also received a cash bonus of $442,833 and a cash payment of $1.6 million related to a guaranteed minimum gain on the options awarded under her 2000 employment agreement.

The company said its officers’ salaries have been fixed at 2008 levels this year.

Limited’s net income fell 69 percent last year to $220 million on an 11 percent drop in sales to $9 billion.

Murphy joined San Francisco-based Gap in August 2007 and, in addition to a $1 million signing bonus, received a base annual salary of $1.5 million, now reduced to $1.275 million. The company said that Murphy volunteered to take the pay cut as the company eliminated merit-based salary increases for most headquarters employees this year.

Two outside directors of Gap, Howard Behar and Penelope Hughes, agreed not to stand for reelection at this May’s annual meeting, as did Doris Fisher, co-founder of the company, who will become an honorary lifetime director.