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Bath & Body Works Shareholder Announces Proxy Challenge

Third Point holds a beneficial ownership position of more than 6 percent.

Ahead of its latest earnings report Thursday, Bath & Body Works looks like it could have a battle on its hands, with an investor gearing up for a proxy fight.

In a letter to the board of directors published Wednesday, Third Point, a top five shareholder of Bath & Body Works with a beneficial ownership position of more than 6 percent, has raised concerns about the company’s corporate governance and decision-making processes, identifying numerous issues pertaining to the board’s oversight of executive compensation, succession planning, capital allocation, investor communication and strategy for enduring value creation. As a result, it is looking to launch a board challenge.

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“This board’s stumbles have resulted in more than a year of stagnation, which BBWI’s new chief executive officer must now contend with,” said the letter, referring to the appointment of Gina Boswell, a former Unilever executive, in December. Third Point is run by billionaire investor Daniel Loeb.

“Ms. Boswell seems to have ‘hit the ground running’ and is focused on addressing certain issues that were ignored by prior executive leadership,” it continued. “Given the many tasks confronting the company, we had hoped that there would be a willingness to engage in constructive, transparent collaboration.”

Third Point added that while conversations with the board were initially productive, including acting on its suggestion to appoint Lucy Brady as an independent director, discussions have stalled and its concerns about the way the board operates have intensified.  

“We believe it is imperative that a shareholder representative is added to provide necessary oversight and have been clear with the company that failure to do so would leave us no alternative but to pursue a proxy contest,” the letter said.

Among its complaints was the compensation Sarah E. Nash received for taking on a new role as executive chair and interim CEO in 2022, calling her near $18 million in compensation “eye popping.”

Nash served as executive chair of the board between February 2022 and January and as interim CEO between May and Dec 1. after Andrew M. Meslow’s departure due to health reasons. She has since transitioned back to chair of the board.

“Ms. Nash’s exorbitant compensation is even more remarkable when compared to her counterpart at the company’s closest and much larger competitor, Ulta Beauty, which paid its chief executive officer approximately $8.9 million in 2022. It is also worth noting that Ulta Beauty’s highest-paid independent director received less than half of Ms. Nash’s board compensation,” it said.

In a statement, Bath & Body Works said: “We value the perspectives of all Bath & Body Works shareholders and are open to opportunities that support our commitment to drive value creation and strong operating performance. It is unfortunate that Third Point has chosen to announce its intent to pursue a costly public proxy fight despite the board’s good faith engagement efforts over the past several months. The board will review and consider Third Point’s proposed nominations in due course once they are received.”

In August, Bath & Body Works said it had eliminated about 130 roles, the majority of which were leadership positions as it pursues “a number of initiatives to improve financial performance and better position the organization for long-term growth.”

The company was formed a year before that in August 2021, when the former L Brands split into two entities: Victoria’s Secret and Bath & Body Works. Each company trades individually on the New York Stock Exchange. Bath & Body Works was number 14 on WWD Beauty Inc’s most recent Top 100 Beauty Manufacturers list, with $4.6 billion in sales for calendar 2021.