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The Executive Pay Race: Ralph Lauren Tops List With $14 Million in '04

The annual WWDList of top American apparel makers shows that, after a boom year for business, executives in the sector outperformed their retail peers by 50...

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NEW YORK — Looking for a big paycheck? Go to the vendor side.

The annual WWDList of top American apparel makers shows that, after a boom year for business, executives in the sector outperformed their retail peers by 50 percent in salary alone and got bonuses of almost 70 percent higher.

Just consider numero uno Ralph Lauren: His salary and bonus jumped 58 percent last year to $14.3 million. That was four times more than the number two, Peter Boneparth of Jones Apparel Group.

Of course, the increase stemmed from the performance of Polo Ralph Lauren, which saw its profits rise 12.5 percent last year and a staggering 298.5 percent in the first quarter of the current year.

The salary and bonus also are among the reasons Lauren — who will present his spring collection on Friday — is one of the richest men in fashion, with a worth estimated by the latest WWDScoop of $3 billion, including a priceless car collection and homes in Manhattan; Montauk, N.Y.; Bedford, N.Y.; Colorado, and Jamaica. On that list, he's just behind Giorgio Armani's $4.6 billion net worth.

But Lauren isn't the only one moving up the charts. Gaining momentum in pay were the two top executives from Jones Apparel Group. Jones' chief executive officer, Peter Boneparth, and chairman, Sidney Kimmel, both shot into the top 10 this year, thanks to 12 months filled with the acquisitions of Barneys New York and Maxwell Shoe Co. Boneparth finished at number two, and Kimmel, 10th.

Noticeably absent from the rankings this year, though, are Tommy Hilfiger's top executives: The company has yet to file a proxy, keeping Tommy himself and David Dyer, president and ceo, from making the list at all. Hilfiger, who WWDScoop estimates is worth about $600 million, has a contract that grants him 1.5 percent of the sales of Tommy Hilfiger USA in excess of $48.3 million. Last year, he earned $18.3 million and, had his company filed with its accounts, he most likely would have topped the current one, as well. It's a fortune that has enabled Hilfiger to buy a $40 million estate in Mustique, a home on Nantucket worth more than $10 million and a $12 million pad in Manhattan.
The next 10 highest-paid apparel suppliers were an equal who's who of the industry, with Reed Krakoff, president and executive creative director of Coach, tying for 11th with Mackey McDonald, chairman, president and ceo of VF Corp., at $3 million, and Philip Knight, chairman of Nike, at 13, with $2.8 million. Tying for 14th at $2.4 million were Mark Parker, president of the Nike Brand; Lew Frankfort, chairman and ceo of Coach, and Mark Weber, then president and chief operating officer of Phillips-Van Heusen and now its ceo. Jeffrey Swartz, president and ceo of Timberland, came in at number 17 with $2.3 million, and Kenneth Cole, chairman and ceo of Kenneth Cole, and Bernard Mariette, president of Quiksilver, tied for 18th with $2.2 million. Oscar Feldenkreis, vice chairman, president and chief operating officer of Perry Ellis International, rounded out the top 20 at $2.1 million.

The highest-paid apparel suppliers list is derived from a broader survey of executive pay in the apparel, retail and consumer products industries by the financial editors of WWD and the Fairchild News Service. Year-over-year, the apparel vendors saw their average total annual pay rise 11.7 percent, according to the pay report. The gain was driven by a 12 percent increase in average bonuses as well as an 8 percent gain in executive base pay. An analysis of the results also show that more than one-third of the vendor executives received total annual pay of more than $2 million, while 18 percent of the executives had annual pay packages of more than $3 million.

"The base salaries and bonuses are typically commensurate with companies' performance, so executives have plenty of incentive to further increase those financial results," said Terre Simpson, president of Simpson Associates, a retail, apparel and fashion executive search firm in Manhattan.

Compared with retail executives, on average, the vendors garnered higher total annual pay. The average total annual pay (not including long-term payouts and stock options) for retail executives was $1.2 million in 2004, which compares with $1.8 million for the vendor executives. Regarding bonuses, the vendor executives were awarded an average bonus of $974,000, which is well above the retailers' average bonuses of $552,000.

Simpson said the reason for the difference between retailers and vendors is because the overall corporate structure of a retail operation requires tighter margins and higher expenses. Retail gross margin rates range from about 7 percent (for dollar stores, discounters and mass merchants) to 30 or 40 percent (for specialty and department stores). This compares with 20 to 60 percent gross margin rates of vendors and manufacturers.
"Retailers can have a more difficult time achieving results," she said. "So, if you compare the principal vendors of places like Polo Ralph Lauren and Liz Claiborne, their [compensation] packages will definitely be higher than most retail executives at the same level."

Click to view a complete listing of the top retail executive compensation packages.