Express Failed to Disclose Nearly $1 Million in CEO Perks as Bankruptcy Loomed, SEC Says

It’s not every day that you hear about a big-name fashion retailer getting slapped with charges over undisclosed CEO perks but here we are. Express, Inc., a once-prominent player in the retail space, found itself in the hot seat with the SEC after failing to disclose nearly $1 million in privileges provided to its former CEO, Tim Baxter. As the company faced mounting financial struggles, including a Chapter 11 bankruptcy, this oversight raised serious concerns about transparency and corporate responsibility.

So, what exactly did Express leave out?

The Commission's investigation revealed that the fashion giant understated its CEO's compensation by an eye-opening 94% over three years. Why? Because they failed to disclose $979,269 including Baxter's personal use of chartered aircraft. In 2021, he received $2,895 for jet usage alone, and between 2019 and 2021, he made an average of $5.2 million annually, including $7 million in his first year and $2.3 million in 2020, even as the company struggled with the pandemic. The privileges were hidden under the guise of “business expenses,” but as the regulator pointed out, business use or convenience doesn't cut it when personal benefits are involved. In the eyes of the commission, these perks were not only a violation of regulatory standards but also an erosion of trust both for investors and the public.

From Perks to Bankruptcy

Express’s issues weren’t just confined to CEO compensation. The company, which filed for Chapter 11 bankruptcy in April 2024, had been struggling long before the SEC came knocking. Under Baxter’s leadership, sales were sliding, and the fashion giant failed to adapt to the changing retail environment. Once a go-to brand for casual wear, the company couldn’t keep up with the competition or consumer demand during the pandemic.

Baxter resigned in September 2023, just a few months before the bankruptcy filing. While the company claimed his departure was unrelated to its financial troubles, the timing raised more than a few eyebrows. In the end, the company sold its assets to a group led by WHP Global and Simon Property Group, hoping to reshape the company and start fresh.

The Enforcement Agency Delivers Justice

Despite the seriousness of the charges, the regulator didn’t hit the fashion giant with a civil penalty. Instead, the company was hit with a cease-and-desist order, essentially requiring them to stop their violations without admitting guilt. Why the leniency? Well, the company cooperated fully, self-reported the issue, and worked to correct the errors in their financial filings. They also revised their benefits disclosures in their 2022 proxy statement and even disclosed that Baxter reimbursed the company for $454,000 in personal jet expenses.

Acting SEC Enforcement Director Sanjay Wadhwa summed it up perfectly: “Public companies must comply with their disclosure obligations regarding executive compensation.” Express dropped the ball here, but their transparency and cooperation helped them avoid heavier penalties.

A Lesson for the Industry

Express’s case should be a wake-up call for companies everywhere. When it comes to executive privileges, the rules are clear, disclosure is key. Failing to report perks not only violates the commission's rules but also chips away at investor trust. If a company can’t be honest, how can shareholders trust anything else? The takeaway here is simple: transparency matters. Express, while dealing with bankruptcy and financial struggles, still managed to take the right steps by cooperating with the SEC and making things right. It’s a reminder that even when things go off-track, owning up to mistakes and fixing them is crucial for maintaining corporate integrity and investor confidence. Stay ahead of the curve! Subscribe to MYCPE ONE Insights for the latest in finance, accounting, and corporate news delivered straight to your inbox.