Last month, Michael Zimmerman’s investment firm sent a letter to Bebe’s board of directors in which it described the CEO’s compensation package as “wildly off-market and utterly inappropriate.”
Mashouf, who returned to the role in February, responded with a letter of his own on Wednesday.
“As it relates to my compensation, I take exception with your concern as I’m being paid substantially less than the prior two CEOs when you take into consideration base salary, guaranteed bonus and stock grants,” he wrote.
Prentice Capital, which has a 5.6% stake in Bebe, had also aired its frustration with the retailer’s performance and dissatisfaction with “the board’s continuing and blatant disregard for the interests of Bebe shareholders—other than those of the controlling shareholder, Mr. Mashouf—while its stock has cratered 87 percent over the past year.”
Mashouf pointed out that, as the largest shareholder and founder, he shares the fund’s concerns with how the company was run after he stepped down as CEO in 2013.
“I can assure you that neither the board nor management is content to simply conduct ‘business as usual,’” he wrote, adding, “I can also assure you that the board and management are fully aware of, and are fully complying with, their respective fiduciary duties and do believe we are taking the necessary steps as we seek to reverse the trends of the last three years.”
In the quarter ended Jan. 2, Bebe reported a 2.5% decline in comparable store sales, while net sales decreased 5 percent from $128.9 million to $122.4 million as traffic and conversion fell. Net loss from continuing operations was $5.5 million and loss per share was $0.07.
Prentice Capital’s letter had slammed the board of director’s “utter lack of consideration for and communication with its broader investor base.” But Mashouf said that during a one-hour phone call on Mar. 9, a non-disclosure agreement was suggested in order to further review the changes being made to address the recent financial performance, as well as a meeting in the retailer’s Los Angeles office.
“As you are fully aware, we cannot legally disclose material non-public information to you in the absence of a non-disclosure agreement,” he continued. “In the absence of an executed agreement and as we discussed, we are working diligently to reduce our operating expenses and align them to sales. In addition, we agree that our capital structure needs to be addressed and we are working to solve that as I write.”