Top executives at Skechers USA (NYSE: SKX) are facing allegations of causing significant financial losses to the footwear manufacturer due to their personal use of corporate jets for trips to vacation destinations like Fiji, Bora Bora, and Hawaii.
The lawsuit, which is currently unfolding in Delaware Chancery Court, targets Chief Executive Officer Robert Greenberg and his two sons, who also hold executive positions within Skechers.
According to allegations, the company’s directors failed to impose reasonable limits on the executives’ personal use of corporate assets, including the Bombardier Global Express jets provided to them as part of their compensation packages. These jets incur operational costs exceeding $4,000 per hour, as reported by investors.
Attorney Melinda Nicholson, representing a shareholder in the lawsuit, emphasized that the executives’ personal use of these jets went far beyond reasonable limits and encompassed trips to extravagant locations, such as the south of France, the Seychelles, Los Cabos, and the Bahamas.
This legal challenge coincides with recent research revealing a 21% increase in the average earnings of CEOs of large public companies, reaching $18.8 million in the previous year, even as the S&P 500 index saw a 20% decline.
Skechers’ proxy filings indicate that CEO Robert Greenberg received $22 million in executive compensation in 2022, while his son, Michael, collected $15.4 million, with other family members also benefiting from the company payroll.
Investors claim that a significant portion of the Bombardier jets’ flight time in 2020 and 2021 was used for personal travel, exceeding industry standards and other companies, including Apple Inc., Johnson & Johnson, and ExxonMobil Corp.
The executives’ personal travel expenses ranged from $139,000 to $1.1 million per person in recent years, far exceeding the caps set by similar companies and the 2015 S&P 500 executive average of approximately $54,000.
Skechers shareholders argue that the failure of the company’s directors to oversee and limit these perks resulted in substantial financial losses. Lawyers for the directors contend that the executives’ plane usage was within the scope of their compensation packages, allowing reasonable personal use.
The judge, Morgan Zurn, expressed skepticism regarding the claim of a failure of oversight by the board members, indicating that their liability could not be determined solely based on their decision not to impose restrictions. Zurn will make a ruling on whether the case can proceed in the future.
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