The US Securities and Exchange Commission (SEC) announced on Tuesday that Express, Inc., a clothing retailer, had failed to report nearly $1 million in executive perks provided to its former CEO.
The company, which filed for bankruptcy earlier this year, did not disclose $979,269 in personal benefits between 2019 and 2021. These benefits included the CEO's use of chartered planes for personal travel. As a result, the company understated the CEO's compensation by 94% during that period.
SEC Finds Express Failed to Disclose CEO Perks, Including Charter Flights
The SEC's investigation focused on the retailer's proxy statements for fiscal years 2019, 2020, and 2021, which did not include key details about the perks provided to the CEO.
While the SEC did not name the former CEO in its announcement, it was Tim Baxter, who served as Express' CEO from 2019 until his resignation in 2023, CBS News said.
Under Baxter's leadership, Express failed to disclose the full extent of the benefits, including personal use of company-owned charter flights, a significant form of compensation.
According to the SEC, public companies are required to disclose all compensation packages, including executive perks, to ensure that investors have enough information to make informed decisions.
The SEC emphasized that these rules are in place to provide transparency, particularly when it comes to executive pay. Sanjay Wadhwa, acting director of the SEC's Division of Enforcement, stated that although Express fell short of these obligations, no civil penalty was imposed.
This decision was made due to Express' cooperation with the SEC, including self-reporting the issue and taking steps to address the problem.
Express Settles SEC Charges with Cease-and-Desist Order During Bankruptcy
According to RetailDive, in response to the charges, Express agreed to a cease-and-desist order, which does not require them to admit or deny the SEC's findings. The company did, however, address the issue by taking remedial actions.
The SEC's investigation also took into account the company's bankruptcy proceedings, which resulted in a significant restructuring. In April 2023, Express filed for Chapter 11 bankruptcy, and in June, its assets were acquired for $174 million by a group led by WHP Global.
The SEC's findings highlight the importance of transparency in financial reporting, especially for public companies. For now, Express remains under scrutiny for its handling of executive compensation, but it is unlikely to face additional financial penalties. Investors, however, have been reminded of the need for clear and accurate financial disclosures, particularly regarding executive benefits.
