Urban Outfitters is taking a less combative approach to a new activist investor and said it has plans to replace at least one board member within a year.
In a Friday response to a recent letter from CtW Investment Group, a Washington, D.C.-based investor that works exclusively with union-sponsored pension funds, calling out Urban for its insular, white male-dominated board, the retailer’s chairman and chief executive officer Richard Hayne said Urban’s board is being evaluated, and has been for some time.
“As the CtW letter correctly notes, these changing times require boards to critically evaluate the mix of skills and expertise necessary to continue providing strategic guidance,” Hayne said in a brief letter to shareholders. “The board, and more specifically the nominating and governance committee, have been conducting this analysis for many years, engaging with shareholders and working to enhance the board’s talent in order to continue guiding Urban’s growth.”
To that end, Hayne said Urban was working with executive search firm Diversified Search in its effort to find new candidates for the board, some of which have already been interviewed.
“The committee expects to recommend one or two new, independent directors over the next year without expanding the current size of the board,” Hayne said in the letter. “Furthermore, the nominating and governance committee believes that the board should ultimately have additional independent female representation.”
Urban did not specify which board members are likely to be replaced should any new candidate be elected and a company representative could not be reached for comment.
CtW said Monday that it appreciates Urban’s outreach to shareholders, but that “adding one or two non-independent directors that may be female…does not in itself amount to robust and credible board diversity, particularly when it is not clear which directors will be rotated off the board.”
A representative of the investment group likened Urban’s plans to “painting a house with a bad foundation” and said it “doesn’t address some of the key structural problems.”
CtW said Urban should “articulate a clear refreshment plan with concrete timelines” and a commitment to removing the board members it characterized as non-independent: Margaret Hayne, Richard Hayne’s wife and ceo of Urban affiliate Free People; Scott Belair, a principal at financial advisory firm ZAC Group, and Harry Cherken Jr., a partner with Drinker Biddle & Reath LLP who has been a board director since 1989.
Immediately after CtW published its initial letter, Urban pointed out that it had added two female members to the board since 2013, when it appointed Margaret Hayne, followed by the addition in 2014 of Elizabeth Ann Lambert, the founder and principal of Bunkhouse Management Group LLC, a hospitality management company.
Urban said at the time that “changing the composition of a board is not something that can or should take place overnight” and that the company is taking steps to alter the board “over time.”
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