Dive Brief:
- The Securities and Exchange Commission announced settled charges against footwear company Skechers for failure to disclose payments “for the benefit of its executives and their immediate family members,” according to a recent press release.
- Skechers agreed to a cease and desist order and will pay a $1.25 million civil penalty to settle the SEC’s charges without admitting or denying the commission’s findings, according to the release. The SEC did not name the executives associated with the settlement.
- “We are pleased that the Securities and Exchange Commission recognized our cooperation and remedial efforts, and we were able to come to an amicable resolution,” Skechers said in a statement provided via email. “This outcome is consistent with the results of our previously announced internal review and the corrective disclosures made over the course of last year.”
Dive Insight:
The Manhattan Beach, California-based footwear retailer failed to disclose the employment of two relatives of Skechers’ executives, a consulting relationship between an executive and an individual living in the same household, and assorted compensation received by these individuals in its definitive proxy statements and filings for the years between 2019 and 2020, according to the SEC’s order.
The company did not disclose that a sibling-in-law of an executive officer had received $213,645 while serving as a non-executive employee for its fiscal 2020, according to the order. The next fiscal year, a sibling-in-law of an executive officer received $155,419 in compensation, while the sibling of a different executive officer and director received $486,790 in compensation while both served as non-executive employees, which Skechers also failed to disclose.
Additionally, an individual sharing a household with a company director and executive officer had received $210,000 in compensation when working as an independent contractor of the company for both its fiscal 2018 and fiscal 2019, which was not disclosed.
The footwear company also failed to disclose that for multiple years, two of its executives owed more than $120,000 to Skechers for personal expenses, which had been paid for but not yet reimbursed by the executives, according to the SEC order.
The disclosure of related persons transactions provides crucial information for investors when it comes to evaluating the relationship between the company and its officers, Scott A. Thompson, associate director of enforcement in the SEC’s Philadelphia Regional Office said in a statement included in the release.
“Today’s action is a reminder that companies should take appropriate measures to ensure proper disclosure of such transactions,” he said.
The $1.25 million civil penalty on the part of the popular shoe brand comes as the SEC widens its spotlight on executive compensation and benefits; in 2022, the SEC adopted “pay versus performance” rules requiring U.S. public companies to include a table covering executive pay and financial performance indicators for a five-year period in their filings, CFO Dive previously reported.
That same year, the SEC also adopted new “clawback” policies requiring companies to recover “erroneously awarded incentive-based compensation,” according to an SEC filing at the time. In the past 10 years, the SEC has brought 20 cases against businesses for failing to disclose the perks provided to their executives, including two in 2023, according to a report by Bloomberg.
Skechers’ executive compensation policies and perks have also fallen under the scrutiny of its shareholders; the SEC civil penalty comes approximately a month after a Delaware Chancery Court dismissed a shareholder derivative lawsuit against Skechers which concerned the use of private jets by company executives, according to a February press release.
The suit alleged that Skechers made no effort to put reasonable limits on the use of private jets by executives, who made “excessive” use of the planes and racked up millions in expenses, an attorney for the plaintiff said during a court hearing according to a report by Bloomberg.
The suit named executives including members of the company’s board as well as Skecher CEO Robert Greenberg, his two adult sons, Michael Greenberg and Jeffrey Greenberg — who serve as president and co-founder and VP of electronic media, respectively — and Chief Operating Officer David Weinberg, according to the court’s opinion.
“We are sincerely pleased with the Court’s ruling, but it certainly comes as no surprise,” CEO Robert Greenberg said in a statement included in the company release regarding the case’s dismissal. “We have always believed that this lawsuit should not have been permitted to proceed. We feel vindicated that the Court agreed.”
An SEC spokesperson declined to comment beyond the details included in the Commission’s public filings and press release.
