Not All Comp Packages Are Created Equal

Let’s look at how executives in the apparel industry paid themselves last year relative to performance. I wonder if the volatility in their own comp will mirror that of their stakeholders in ’08?

Tough year, huh? Yes, this is the year where many on Wall Street have a massive question mark around 1) whether or not they will have a paycheck, and 2) to the extent they get one, how big will it actually be? In that context, let’s take a little look at how much money executives in the apparel industry paid themselves last year relative to performance. I wonder if the volatility in their own comp will mirror that of their stakeholders.

The analysis below simplistically looks at two factors. 1) Percent of EBIT that goes towards executive comp, and 2) incremental change in EBIT versus incremental change in comp i.e. are they both moving in the same direction? Here are some stand outs with each.

EBIT Percentage. Yes, I realize that there are many more relevant factors than simply looking at EBIT – including ROIC and other key balance sheet factors. But a quick compare and contrast is pretty mind numbing… 1) Should comp for the top officer really equate to 8% of EBIT for Warnaco, Guess, Ralph Lauren? 2) PVH, Timberland, and Quiksilver are far more balanced.

Incremental Comp vs Incremental EBIT. No consistency here whatsoever. 20 out of 47 executives saw comp move in the same direction as EBIT last year. At least half of those that saw comp growth less than growth in EBIT are the ones with the most egregious comp packages (GES, WRC, RL). The results below speak for themselves.

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