PBT Transcript (3/19/2008)

PBT Transcript (3/19/2008)

MIKE ARMSTRONG: Coming up: It looks like no more free rent for a local CEO at her $7900 a month Rittenhouse Square apartment. We’ll tell you why. And Commerce Bank is getting a new name…sort of. Philadelphia Business Today starts now.
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MIKE ARMSTRONG: Lane Bryant. Fashion Bug. Petite Sophisticate. They’re all owned by Charming Shoppes of Bensalem. The company posted a huge quarterly loss today. Charming lost $128 million or a $1.10 per share during its fourth quarter. How things change in a year. The retailer, which has stores in nearly every shopping mall in America, was profitable during last year’s fourth quarter. Now the company is restructuring, closing stores and in a fight with some of its largest shareholders. Inquirer reporter Maria Panaritis has been following this story and I asked her, “What’s been going on?”
MARIA PANARITIS: Well, the apparel industry and the retail industry, as a whole, is suffering- They’re suffering a significant slowdown. It seemed to begin at the beginning of the fall of last year and the economy has just really taken a toll on the willingness of consumers to buy things. So there’s a broader problem in the industry. However, Charming Shoppes is, is in an acutely vulnerable position because their share price has dropped significantly. It’s lost more than half of its value in the last year and they’ve become the target of some activist shareholders, who may be interested in shaking things up for them.
MIKE ARMSTRONG: As you reported in Wednesday’s Inquirer, even Charming Shoppes CEO Dorrit Bern has had to give up some perks. What was she getting?
MARIA PANARITIS: Well, several shareholders who have accumulated considerable stake in the company as the stock price has gone down over the last number of months are now agitating for some board seats. And, at about the same time that they’re agitating for board seats and saying the executives of the company are getting paid too much, the CEO Dorrit Bern’s compensation package came up for renewal and what happened was, last week, the board of directors finalized some significant changes in that agreement in which they strip her of a number of perks that she’s enjoyed for twelve years. One of those perks involved an all-expense rent-free apartment in Center City at the Rittenhouse Hotel. She now must pay what is about $8000 in rent just to continue living there. A number of other perks including a $1 million annual bonus that she would receive just for agreeing not to leave, just to agree to stay on as chairman and CEO.
MIKE ARMSTRONG: So could her perks or compensation be considered excessive for a CEO in her industry?
MARIA PANARITIS: Well, the company would- would maintain that she’s worth every penny that she’s gotten. And that when you try to keep talent, you have to reward talent. And they would argue also that in the years that Charming Shoppes was doing very well and that she pulled them out of near bankruptcy over twelve years ago, she received compensation that was a reward for a job well done. However, one observer, who looks at, sort of, the practices, the rules of boards and how they reward executives, believes that some of these perks, in particular the housing allowance, were extraordinary and that normally an executive receives something like that for six to twelve months of the first year of their employ, not twelve, thirteen years. So this could leave an impression with shareholders that either she’s not in it for the long haul- but, you know, at the end of the day, she has been here for thirteen years, there has been stability at the top.
MIKE ARMSTRONG: Well, it sounds like they’re addressing things for the long term, but they still face some short term challenges, don’t they?
MARIA PANARITIS: Right. They do have a short term challenge and that is trying to keep these activist shareholders at bay. They are trying to get three board seats. There is a shareholder meeting scheduled for May and these activist investors have made it very clear that they want one of the three board seats. One of the three board seats belongs to the Chief Executive. There’s a federal lawsuit that looks like- that Charming Shoppes has filed against these investors that may limit their ability to make their case in time for the board meeting, so the next few- the next six or seven weeks will be interesting.
MIKE ARMSTRONG: Thanks, Maria. You can read more about Charming Shoppes in Wednesday’s Inquirer.
There’s a new name for Commerce Bank. In a few weeks, it will be TD Commerce Bank. The “TD” comes from TD Bank Financial Group, which agreed to acquire Commerce last October. TD is a Canadian financial services company and the deal has been valued at $7.7 billion. The companies say customers will continue to have the services that make Commerce successful, such as seven day a week banking.
That’s it for today. At the Inquirer, I’m Mike Armstrong for Philadelphia Business Today.

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