Ralph Lauren Signs Five-Year Deal

Founder and ceo of Ralph Lauren Corp. has a new contract that extends through the end of the firm’s 2017 fiscal year.

NEW YORK — Ralph Lauren, the 72-year-old founder, chairman and chief executive officer of Ralph Lauren Corp., signed a new five-year employment contract on June 26 that will keep him at the helm of the company he founded until April 1, 2017, the end of the firm’s 2017 fiscal year.

This story first appeared in the July 3, 2012 issue of WWD.  Subscribe Today.

The agreement replaces a contract that would have expired next April, at the conclusion of the company’s current fiscal year.

Lauren’s new compensation package is less weighted toward cash and more toward equity to be derived through stock and option awards.

Under his new contract, Lauren’s salary increases 40 percent to $1.75 million a year from its previous level of $1.25 million. His target and maximum cash bonuses — phrased as “nonequity incentive plan compensation” in proxies like the one filed by the company with the Securities and Exchange Commission Monday — are reduced to $9 million and $13.5 million, respectively, from their previous levels of $13 million and $19.5 million.

Ralph Lauren Corp. filed a Form 8-K with the SEC detailing the new arrangement Monday, the same day it submitted its definitive proxy with the SEC.

In the proxy, Lauren’s reported compensation for fiscal 2012 rose 22.3 percent to $36.3 million from $29.7 million in 2011. The cash portion of his pay was unchanged, with salary and cash bonuses remaining at $1.25 million and $19.5 million, respectively. The salary and bonus numbers have remained unchanged for the past three fiscal years, with the $19.5 million representing the maximum possible and 150 percent of the target amount. The company said in its proxy that net income before taxes last year rose 23 percent above fiscal 2011 results, which also generated maximum bonus payouts.

In fact, all of Ralph Lauren’s top executive officers but Lauren — Roger Farah, president and chief operating officer; Jackwyn Nemerov, executive vice president; Tracey Travis, senior vice president and chief financial officer, and Mitchell Kosh, senior vice president of human resources — were eligible for and received an additional 10 percent above the maximum provision, for respective bonuses of $9.9 million, $3 million, $880,000 and $880,000.

The boost in Lauren’s reported compensation last year came from a 77.6 percent advance in Lauren’s stock and option awards, which totaled $15.3 million versus $8.6 million in the prior year. Because of vesting schedules and fluctuating stock prices, these awards aren’t necessarily received by the executives earning them but are required to be reported at fair market value at the time they are granted.

With Lauren’s new salary higher and his potential cash bonuses lower, his eligibility for stock and option awards has been modified so that it is now based on value, rather than the previous configuration that was tied to a specific number of equity units. The target amount for grants will be $14 million. One-third of this amount will fall under options that can’t increase, while the remaining two-thirds will be for restricted stock units that can increase up to 50 percent if performance criteria are met or be reduced if they aren’t.

Farah’s reported compensation was down 1.2 percent last year to $19.3 million, while Nemerov’s rose 19.3 percent to $12.1 million.