Apparel vendors felt the sting of a slower economy very directly in 2008 — right in their wallets.
Lower profits dragged down the compensation of top industry executives by a total of 25.6 percent last year, and a few even elected to forgo some bonus money as they made tough decisions that often translated into smaller head counts.
Ralph Lauren, chairman and chief executive officer of Polo Ralph Lauren Corp., topped the list of highest paid vendors for the fifth year in a row despite a 40.6 percent decline in total compensation, to $20.3 million. Roger Farah, the company’s president and chief operating officer, ranked second as his compensation fell 10.3 percent to $14.1 million. Jackwyn Nemerov, Polo’s executive vice president, ranked 12th.
Overall compensation for the top 10 vendor executives fell to $91.8 million from $123.3 million, according to regulatory filings with the Securities and Exchange Commission. The double-digit percentage decline was greater than the 9.4 percent decline in the top 10 retail paychecks, to $130.4 million from $144 million. However, the top 10 vendors had an increase of $34.6 million, or 39 percent, in 2007, while the top retailers, already feeling the effects of a slowdown in consumer spending, saw compensation decline 27.4 percent. Until 2008, vendor pay hadn’t declined for two years, dipping a fraction to $47.1 million in 2005 from $47.3 million in 2004.
However, with earnings remaining under severe pressure this year and companies’ boards sensitive to public perceptions of overpaid executives, the prospects for growth in overall compensation are iffy at best. Recent moves by activist investors — and even on Wednesday by the House Financial Services Committee —to give shareholders “say on pay” are likely to further inhibit any elevation of executive pay packages.
At least two apparel executives made statements with their compensation. Jones Apparel Group Inc. president and ceo Wesley Card opted to forgo an $810,000 cash incentive award “in recognition of current business conditions and the impact on associates of the company,” Jones’ proxy statement said. Kenneth Cole, founder, chairman and chief creative officer of Kenneth Cole Productions Inc., elected to defer $974,919 of his 2008 base salary of $1 million. The money was instead put into a deferred compensation plan, according to a spokesperson.
Terming such moves both “symbolic” and “appropriate,” Jaimee Marshall, senior vice president at executive search firm Kirk Palmer & Associates, said, “I think that in forfeiting a bonus, you send a message to your employees and the market that you are committed to the business.
“In a public environment where executive compensation is available for all to see, it can be especially demotivating to the employee pool — which knows it will not get bonuses and in some cases have their salaries cut back, to see their leaders with multimillion-dollar bonus packages, even if they are contractually earned,” Marshall said.
Card missed the top 10 highest paid executives last year, coming in 11th, despite a 36.4 percent increase in total compensation to $5.5 million. His $1.6 million base salary was higher than any of the executives in the top 10. As for his decision to forgo the cash incentive award, Terre Simpson, president of executive search firm Simpson Associates, said, “This is a generous move which is exceptional and speaks so well of him.”
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