Friday, January 05, 2007

Is There a Judgment Gap at The Gap?

Herb Greenberg in his “Market Blog” writes a commentary entitled “Gap Gossip” about the possibility of The Gap Inc. selling Old Navy. He writes in part:

“Gap made it clear today that changes are likely at Old Navy and its flagship Gap brands, following disappointing sales results. CEO Paul Pressler made it clear that "with the active involvement of our board" the company is reviewing brand strategies of the two.”

I decided to read the recent Proxy Statement filed by The Gap Inc. related to its Board of Directors and wrote the following response to Herb Greenberg on his blog:


I think it’s a very good idea to get the entire Gap Board of Directors involved in this crucial decision. Maybe they should bring their spouses to the meeting too.

After all there is a saying “behind every great man there’s a great woman.” For the female directors, “behind every great woman there’s a great man.”

They would not violate company policy as read in a Proxy Statement filed on May 9, 2006:

“We occasionally invite director spouses to accompany directors to Board related events, for which we pay or reimburse travel expenses. These travel expenses are reported as compensation to the director and are grossed up to cover taxes. All directors and their immediate families are eligible to receive discounts on our merchandise in accordance with the Gap Inc. corporate employee merchandise discount policy.”

Well I guess if they sell off a division they may lose some of their discounts on merchandise. Think that will impact their decision?


Sam E. Antar (Former Crazy Eddie CFO & ex-felon)

My blog question and comment here:

Do you think this Board will retain the right of employee discounts as a golden parachute? Perhaps the right of employee discounts precludes any Board member the ability from rendering independent judgment. Sounds petty? People have done stranger things for less.


Jwhite518 said...

Merchandise discounts a golden parachute? More like a tin parachute. Come on, do you really think senior management's decisions are influenced by their ability to buy a pair of jeans at 50% off?

Sam E. Antar said...

J White:

Maybe you are correct.

However as a criminal and especially as a former retailer I have seen a lot of cheap moves and silliness in my life.

Look at the perks in the proxy statement I quoted. Now the perks are legitimate.

However, "gross ups" remind me of the days at Crazy Eddie when we legitimized our previous partially "off the books" payroll by paying people fully "on the books" to make up for taxes so they could net the same pay.

In addition, the company pays for spouses to tag along on certain events. Why not pay a higher gross pay to Directors without these perks and end this pettiness and silliness?

All human beings are sinful to some extent and subject to some level of temptation. The criminal’s temptation rises to the level of what society defines as criminality. However, it is not inconceivable that any Director of The Gap may consider such petty factors such as employee discounts as part of their decision rendering process as all human beings act ultimately in their self interests.

A person may make the argument that some of the perks disclosed in the proxy statement are petty too even if they are legitimate. Therefore, if such Directors are petty in this aspect of their lives it may be possible (albeit not probable) that they can be petty concerning their employee discounts too.

Your opinion is respected.