Whodunit at Talbots?

Many "whodunit" stories are fascinating, whether they're fictional mysteries or true crime accounts. There's often some shocking twist at the end, like when some shadowy, stealthy person no one expected ends up being the perp. When it comes to CEOs' outrageous pay plans, we can conduct our own version of sleuthing for exactly whodunit.

Last May, several Fools took a look at a number of corporate CEOs and questioned whether they were worth their handsome pay. One of the subjects of scrutiny was retailer Talbots (NYS: TLB) , a perennial struggler with a well-paid CEO.

Trudy Sullivan took the helm of Talbots in mid-2007; longtime shareholders probably think her leadership has left a lot to be desired. The last time Talbots increased annual sales was in the year ended January 2006. A year later marked the last time the retailer reported an annual profit.

One thing that Sullivan has achieved is reducing its total debt-to-capital ratio from a horrifying 162% in January 2010 to a much more reasonable 36% as of the most recent quarter. Still, its competitive position continues to erode.

Despite the lack of achievement, Talbots' board has stood by the CEO and pays her handsomely. Sullivan's annual base salary has been fixed at $1 million for years now. In fiscal 2009, her payout included an additional $1.4 million in "other compensation," which is usually a catch-all for outrageous perquisites.

That year, Sullivan received an auto allowance, and perks like paid commuting expenses between her home in New York and Talbots' headquarters in Massachusetts, as well as a housing allowance. However, a whopping $1.2 million of Sullivan's "other compensation" reimbursed her for the loss of retirement benefits that had been frozen throughout the company's ranks. This exceedingly poor move occurred while Talbots laid off employees and reduced surviving workers' benefits.

It's easy to focus on chief executives themselves when we ponder outrageous CEO pay plans and poor operational performance, but as GMI's Nell Minow reminded us at our Foolish Investing Conference last week, boards of directors are responsible for these negative outcomes. When it comes to CEO pay, look directly at companies' compensation committees.

So whodunit? Here are individuals serving on Talbots' compensation committee and a little background information about where else they fit in corporate America:

  • Gary M. Pfeiffer, Talbots' board chairman and chairman of its compensation committee, is the retired senior vice president and chief financial officer for DuPont (NYS: DD) . Pfeiffer also serves on the boards of Quest Diagnostics (NYS: DGX) and Internap Network Services (NAS: INAP) .

  • John W. Gleeson has retired from his post as senior vice president and chief strategy officer at Walgreen (NYS: WAG) . He's also served as a director at now-bankrupt AMCORE Financial.

  • Andrew Madsen is an active corporate executive, currently working as president and chief operating officer at Darden Restaurants (NYS: DRI) .

These folks had better prepare themselves; shareholders have realized they can use their annual proxy votes to express their displeasure with pay policies and other corporate governance issues, including board elections.

Last spring, a majority of Talbots shareholders voted against the retailer's executive compensation policy, so these individuals had best be thinking about how to make things right with understandably displeased shareholders.

At the time thisarticle was published Alyce Lomax does not own shares of any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Quest Diagnostics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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