Top executives at Skechers USA allegedly cost the footwear maker millions of dollars by hopping on corporate jets for personal jaunts to vacation hot spots such as Fiji, Bora Bora and Hawaii — and the company’s directors didn’t do anything to stop them.
Those are the accusations at the heart of a lawsuit playing out in Delaware Chancery Court against Chief Executive Officer Robert Greenberg and his two sons — who also serve as Skechers executives. Directors made no effort to put reasonable limits on executives’ personal use of the company’s assets, Melinda Nicholson, a Louisiana-based attorney for the shareholder who brought the suit, told a judge Thursday.
The executives took trips on a pair of twin-engine eight-seat Bombardier Global Express jets, a perquisite granted under the managers’ compensation plans, Nicholson told Judge Morgan Zurn. The planes cost more than $4,000-an-hour to operate, investors said.
“Their personal use of the planes was way beyond excessive,” Nicholson told Zurn at a hearing on whether the case should be thrown out. Skechers directors dispute that the non-business trips to ritzy places such as the south of France, the Seychelles, Los Cabos and the Bahamas violated the terms of the executives’ compensation packages.
The challenge to the Skechers jet perks comes as researchers found that chief executive officers of large public companies earned an average of $18.8 million last year – a 21% increase over the previous year at a time when the S&P 500 index was down 20%. That means CEOs of S&P 500 companies received an average of 324 times more than regular workers.
Skechers’ proxy filings show Greenberg got $22 million in executive compensation in 2022 while his son, Michael, collected $15.4 million. Other members of Greenberg’s family on the company payroll raked in a collective $12.3 million. Some of that compensation came in the form of personal use of the company’s airplanes, according to the filings.
Investors calculated that 56% of one of the Bombardier jets’ 2020 flight time consisted of personal use while the other plane was used 64% of the time for personal flights the next year, according to court filings. Nicholson said Skechers executives’ personal travel on the corporate jets exceeded similar use by their counterparts at companies such as Apple Inc., Johnson & Johnson and ExxonMobil Corp.
The Skechers executives incurred costs of $139,000 to $1.1 million apiece on personal travel in each of the last few years, according to court filings. Most similar companies cap jet use well below those levels, and the average among S&P 500 executives in 2015 was about $54,000, according to the filings.
The failure of the Skechers directors to police the perk “cost the company significant money,” Nicholson said.
Lawyers for the directors argued that the Greenbergs’ plane usage was part of their compensation packages, which allows reasonable use of the jets for personal trips.
“The plaintiffs can’t legitimately claim a failure of oversight” simply because board members didn’t take steps to limit executives contractual rights, said John Gildersleeve, an attorney representing directors. “This was not an example of squandering corporate resources.”
Zurn said she will rule later on whether the investors’ case can proceed. She expressed skepticism about the claim that board members failed in their oversight duty. “It makes me nervous to be asked to hold directors liable solely because they may have chosen not to do something,” the judge said.