CEO Behind Hilfiger Overpaid by $8 Million, Crystal Says

Shareholders of PVH Corp. (PVH), owner of the Tommy Hilfiger and Calvin Klein apparel brands, voted today in favor of Chief Executive Officer Emanuel Chirico’s compensation plan. Pay expert Graef Crystal says he’s overpaid.

About 97 percent of votes cast at New York-based PVH’s annual meeting approved the company’s executive pay plan for last year, spokeswoman Dana Perlman said in an e-mail. Chirico received $18.4 million in the year ended Feb. 2, about 70 percent more than what Crystal calculates as his going rate, or the pay he should receive based on his company’s size, total return versus the Standard & Poor’s 500 Index (SPX) in its fiscal year and his tenure as chief executive.

Chirico was the most overpaid among the CEOs of 19 U.S. retailers in Crystal’s study. PVH lagged the S&P 500 by 20 points in the 12 months ended Jan. 31, even after posting four consecutive fiscal years of revenue growth.

“You’re free to look at any financial metrics, but to me the ultimate one is excess total return because it’s decided by the market,” Crystal said in a phone interview. “The one thing you can’t influence as a CEO is the market.”

Proxy adviser Institutional Shareholder Services Inc. recommended investors vote in favor of PVH’s pay plan because it’s consistent with company performance, according to a June 4 report. Chirico’s total pay, as measured in PVH’s summary compensation table, jumped 48 percent from the year earlier, according to the company’s proxy.

Stock Award

“While CEO pay has increased significantly in the past year, pay remains aligned with company performance at this time,” ISS said in its report. Subodh Mishra, a spokesman for ISS, said the company doesn’t comment beyond its reports.

Chirico received a salary of $1.35 million in fiscal 2013, according to the company’s proxy. PVH granted him a $2.52 million cash bonus, and his stock award, some of which vests over three years and upon the achievement of certain performance targets, was valued at $11.3 million, according to the company’s summary compensation table.

“The Crystal analysis was based on a one-year snapshot while Mr. Chirico’s 2013 compensation appropriately reflects our favorable performance against our peers over the past several years, as well as the need to continue to perform over the next three years in order to earn the stock compensation that is reported for 2013,” Perlman said in an e-mailed statement.

‘Performance Cycle’

Chirico’s $11.3 million stock award will be “paid out in future years if performance objectives or service requirements are met,” PVH said in its proxy. The U.S. Securities and Exchange Commission requires companies to include the full grant-date fair value of the award in the summary compensation table, and PVH will “expense the cost over the applicable performance cycle,” according to the proxy.

PVH’s size also factored into Chirico’s lower going rate, Crystal said. The company’s fiscal 2013 revenue of $8.2 billion was 43 percent of the median of the 19 companies in the study.

“It’s not a big company at all,” Crystal said. “He gets marked down for being small to begin with.”

Crystal’s study used information from SEC-mandated summary compensation tables, which report some awards in the year they’re granted rather than for the year they’re earned. Some awards are restricted, vesting and paying out over a set time frame, and the receipt of others may depend on future performance goals. The summary compensation table also counts changes in pension and the value of perks.

Pay Model

The retailers were part of a pay model that covered 341 companies, all of them members of the S&P 500, Crystal said.

Last year, about 99 percent of shareholder votes were cast in favor of PVH’s executive compensation plan, according to its proxy statement this year.

“We interpret these results, coupled with discussions that we have had from time to time with investors regarding compensation, as a validation of our pay-for-performance compensation program,” PVH said in the filing.

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editors responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net Peter Newcomb

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