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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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.
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