Bankrupt Retailer Express Avoids SEC Fine in CEO Perks Disclosure Case

The Securities and Exchange Commission (SEC) announced charges against bankrupt fashion retailer Express for failing to disclose nearly $1 million in perks provided to a former chief executive.

Despite the violation, the SEC did not impose a financial penalty on the company, citing its cooperation and remedial actions.

As the federal agency responsible for investor protection, the SEC requires public companies to fully disclose compensation packages to enable investors to assess a company's financial situation accurately. This includes listing bonuses and personal benefits provided to executives that exceed $10,000 in a single year.

Express, which filed for Chapter 11 bankruptcy earlier this year, failed to report $979,269 in perks provided to its former CEO across its definitive proxy statements for 2019, 2020, and 2021. These undisclosed perks were largely related to the CEO’s use of private chartered jets, along with expenses for meals and hotels.

According to the SEC, these perks should have been categorized under the “all other compensation” section of the relevant forms. Instead, Express understated the total value of the perks by as much as 94%, violating disclosure requirements.

“Express did not have adequate controls, policies, or procedures in place to effectively identify and analyze potential compensation for disclosure,” the SEC stated in its order on Tuesday.

The issue was uncovered after Express identified potential misconduct and enlisted external legal counsel to conduct an internal investigation. Before completing the investigation, the company self-reported to the SEC that it had failed to disclose the full extent of executive compensation for the three years in question.

Express took several remedial steps, including revising figures in its 2022 proxy statement to reflect accurate amounts for previous years. The company disclosed that it had provided approximately $454,000 in perks to the former CEO, who subsequently reimbursed the company for those benefits.

“Public companies have a duty to comply with their disclosure obligations regarding executive compensation, including perks and personal benefits, so that investors can make educated investment decisions,” stated Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, in a press release.

Wadhwa also emphasized the SEC's reasoning for not imposing a civil penalty: “Although Express fell short in carrying out its obligation, the commission declined to impose a civil penalty based, in part, on the company’s self-report, cooperation with the staff’s investigation, and remedial efforts.”

Express, which has been navigating bankruptcy proceedings, could not immediately be reached for comment. 

By fLEXI tEAM