Skechers USA Inc. is waiting to see if a lawsuit over executive abuse of private-jet perks is cleared for takeoff.
The company was in court last week for a hearing to determine if the lawsuit would be thrown out, Bloomberg reported Thursday. The legal dispute that originated in 2022 stems on whether Skechers CEO Robert Greenberg and his sons Michael and Jeffrey took trips on a pair of company-owned Bombardier Global Express jets that could be considered excessive and a breach of their compensation plans.
While use of the twin-engine eight-seaters is part of the executive compensation package, attorney Melinda Nicholson who represents the shareholder behind the lawsuit told a judge that the planes cost more than $4,000-an-hour. “Their personal use of the planes was way beyond excessive,” Nicholson told the judge overseeing the case, according to Bloomberg.
The Skechers board disputed allegations that non-business trips to places such as the south of France, the Seychelles and Los Cabos violated the terms of the executive compensation packages, Bloomberg reported, citing Judge Morgan Zurn’s skepticism that board members failed in their oversight duty.
Michael Conte v. Robert Greenberg, et al. was filed on July 21, 2022, in Delaware Chancery Court, according to a Securities and Exchange Commission (SEC) filing.
The complaint against some Skechers board members alleges “breach of fiduciary duty, waste of corporate assets, breach of duty of candor and breach of contract in connection with certain executive officers’ personal use of two company-owned aircraft.” The complaint includes a derivative action which shareholders file on behalf of the corporation when leadership seems unwilling to step in. In the Skechers case, the allegation is that the board of directors failed to stop the alleged excessive use of the two jets, which cost the company thousands of dollars.
The footwear giant “seeks actual damages in favor of Skechers sustained as the alleged result of defendants’ alleged breaches of fiduciary duties, judgment directing our company to take all necessary actions to reform and improve its corporate governance practices [and] termination of certain executive officers for allegedly violating their employment agreements,” according to the federal filing. The complaint asked the court to direct the sale of one of the company-owned jets, as well as customary professional fees, costs and expenses.
“We believe that we have meritorious defenses and intend to defend this matter vigorously,” Skechers said in the SEC filing. “Notwithstanding, given the early stages of these proceedings and the limited information available, we cannot predict the outcome of this legal proceeding or whether an adverse result in this case would have a material adverse impact on our results of operations or financial position.”
According to Skechers; proxy filing in May, the board approved a business aircraft use policy detailing criteria for professional and personal use of jets owned or chartered by the Manhattan Beach, Calif.-headquartered company. The policy took effect on Oct. 1, 2022, after Conte’s attorneys filed the lawsuit. Under the new policy, executives are granted limited personal use—55 hours each for the company’s CEO, president and COO—and given reimbursement procedures if costs exceed these limits. Unreimbursed costs linked to personal use are deemed the employee’s taxable income.
The proxy filing stated chairman and CEO Robert Greenberg’s total compensation at nearly $22.1 million last year, including a base salary of $6.2 million, $7 million in stock options and the rest attributed to a cash award under an incentive plan and other compensation. President Michael Greenberg received total compensation of nearly $15.5 million, consisting of a base salary of $5.0 million, $5.8 million in stock options and the balance in the form of a cash award under the incentive plan and other compensation.
For the second quarter ended June 30, the company reported a 69 percent gain in net earnings to $152.8 million, or 98 cents a diluted share, on a sales increase of 7.7 percent to $2.01 billion. The company expects to report third-quarter results on Oct. 29.
The casual sneaker brand that counts Martha Stewart as a brand ambassador, now includes collaborations this year with Diane von Furstenberg and Skechers x Snoop Dogg. Last year, it launched Skechers Viper Court and became the leading pickleball footwear brand in the U.S. Earlier this year, the company partnered with Pickleball England as a sponsor of the fast-growing sport.
