Dillard’s exec pay, leadership defended
Posted on Friday, October 31, 2008
Independent directors for Dillard’s Inc. have taken issue with what they say are “some of the more troublesome statements” this week in a letter from New York City-based investors demanding the replacement of the company’s current management led by William Dillard II.
Directors Robert Connor, Peter Johnson and Warren Stephens affirmed their support of the current management’s strategy and disputed claims that Dillard and other executives are overpaid.
“We are deeply concerned regarding the state of the economy, the collapse of consumer confidence, retailing in general and the performance of the Company in these troubled times,” the directors wrote in a joint statement. “Nevertheless, we believe our management team has an appropriate strategy for dealing with the new environment.”
Dillard’s family members fill many executive roles, including President Alex Dillard and Executive Vice Presidents Mike Dillard and Drue Corbusier, all siblings. The family members control Dillard’s class B shares, which allows them to elect most company directors.
The three directors’ statement avoided several claims in a letter released this week from New York City-based Clinton Group Inc. and Barington Capital Group L. P., such as the assertion that most members of the Dillard family are underqualified for their positions. And while it referred to two “record-setting” quarters in 2007, the statement mostly ignored the investors’ critique of Dillard’s performance.
“The key issue is the performance of the Company, which over the past ten years has been nothing short of atrocious,” James A. Mitarotonda, President and CEO of Barington Capital Group, L. P., said in a prepared statement to the Arkansas Democrat-Gazette on Thursday. “We do not understand how supposedly independent Class B directors — with a fiduciary duty to all of the Company’s stockhold- ers — can continue to express confidence in the management team of Dillard’s.”
Little Rock-based Dillard’s on Thursday declined comment. A spokesman for Stephens said he had no comment beyond the letter, and Johnson did not immediately respond to an e-mail requesting further comment.
In the past 10 years, Barington said in its letter Monday, Dillard’s market capitalization has dropped from more than $ 4. 36 billion to less than $ 246 million early this week. What’s more, the investors said, “on Mr. Dillard’s watch, Dillard’s has not posted an increase in annual comparable store sales since Fiscal 1999 and lags behind its peers on virtually every retailing metric.”
“Clearly, Dillard’s operating performance is worse than their peers’ from a [comparable ] stores perspective,” said Pete Hastings, a retail bond analyst with Morgan Keegan and Co. in Memphis. While Barington and Clinton said the company’s executives are overpaid, the directors cited Institutional Shareholder Services and Glass Lewis & Co. reports that said William Dillard II’s compensation was below the median CEO’s pay in the company’s peer group. Dillard in 2007 received total compensation of $ 1, 110, 269, including salary of $ 810, 000. The Democrat-Gazette uses The Associated Press method for calculating such compensation, so totals don’t exactly match regulatory filing totals.
Dillard’s shares on Thursday closed at $ 4. 63, down 28 cents or 5. 7 percent, on the New York Stock Exchange. In 2007, Connor received $ 165, 400 in stock awards and fees for being a Dillard’s director, according to regulatory filings. Stephens received $ 132, 400 and Johnson received $ 144, 900.
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