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Dillard's Directors Object to Firing CEO

(Filed Under Fashion News). Three Dillard's Inc. board members rejected a request by hedge fund investors to fire the department store chain's chief executive, William Dillard II, because of the company's weak performance.

The letter, written by directors Peter Johnson, Robert Connor and Warren Stephens, expresses concerns with a demand by Barington Capital Group LP and Clinton Group Inc. that Dillard’s immediately search for a new CEO and replace other Dillard family members.

According to the Wall Street Journal, the Dillard family controls eight of the company's 12 board seats through its super-voting Class B shares. The hedge funds collectively hold 5.27 percent of the company's Class A shares.

The Dillard's directors also cited findings by Institutional Shareholder Services that the CEO's salary was "well below the median in its peer group in 2007." A report by advisory firm Proxy Governance that said William Dillard II's average three-year compensation was 54 percent above the median paid to other CEOs at similar companies.

Yesterday, Barington Chief Executive James Mitarotonda told Reuters that the most troubling issue was Dillard's consistently poor performance under current management.

"The key issue is the performance of the company, which over the past 10 years has been nothing short of atrocious, regardless of the state of the economy," he said.

"The key issue is the performance of the company, which over the past 10 years has been nothing short of atrocious, regardless of the state of the economy," said Barington chief executive James Mitarotonda. "We wonder what it will take for the independent directors to finally acknowledge what has been obvious to us for so long, that the management team of Dillard's needs to be replaced," Mitarotonda said.

The Wall Street Journal also cited that Dillard'sswhich has $1.38 billion in debt outstanding-has $100 million coming Nov. 15. According to its latest quarterly report to the SEC, it had $108.4 million in cash and cash equivalents as of Aug. 2. Dillard’s reported a $38.3 million net loss for the 13 weeks ended August 2, 2008 compared to the net loss of $25.2 million for the 13 weeks ended August 4, 2007.

more Fashion News >>

Published 10-31-2008 by Deena Campbell

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