It has emerged that one of the directors of directors of Chico’s FAS, Inc. (NYSE:CHS) is also the vice chairperson of a competing firm, Hudson’s Bay Co (TSE:HBC). Despite numerous objections from activist hedge fund Barington Capital, Bonnie Brooks went ahead to join the board of Chico’s sometimes in July. The situation of double roles is somewhat raising conflicts of a possible conflict of interest which has pushed Brooks to step down from the vice chairperson’s position.
The occurrence has led to the adoption of a policy by Chico’s which slaps the directors with a limitation on the number of boards they can join at a go. According to Jon Lukomnik, an executive director at a Research Center Institute in New York says that it is not easy for any director serving on multiple boards to navigate around their responsibilities. According to mapping service BoardEx, thousands of other leaders are on various boards within the same sector. However, having double directorship with competing firms is somewhat a betrayal of loyalty. As such, given that Chico’s, Saks and Lord & Taylor are competitors, it was necessary that Brooks steps own.
Activist investor Barington Capital turns heat on Chico’s
The New York-based hedge fund has outlined its demands on apparel chain Chico’s claiming that they will cut costs while at the same time boost revenue. The company also wants the retailer to halt any new acquisitions and instead concentrate more on the buying of bad stock. Barington is of the opinion that Chico’s can perform much better. It is possible for the company to make double its earnings per share in three years according to Barington’s founder, James Mitarotonda who is behind successful retail investments.
Chico’s has embraced Barington’s suggestions. It’s willingness to indulge leaders who have skills and expertise to propel the company’s value is a sign of commitment to its cooperation. Apparently, the hiring of Shelley Broader as Chico’s chief executive plus the board’s generous pay to her of $13.5 million have been criticized by Mitarotonda who says that they are not relevant to performance goals.
