The Gap

Annual Meeting May 11

CEO Sonia Syngal’s total reported compensation was $21,905,521 in 2020, her first full year as CEO, largely because of a stock award valued at about $17.2 million. In 2019, when she was President and CEO of subsidiary Old Navy, her total compensation was $4,765,962.

There’s no question that March 2020 was not an ideal time to bring in a new CEO. However, shareholders have every reason to be concerned about Syngal’s generous offer letter given that she was promoted from within the company. The theory behind offer letters is that they are needed to lure executives from other successful companies. Syngal, however, has been with Gap since 2004.

Furthermore, the company delayed goal setting on these Performance Restricted Stock Unit (“PRSU”) awards from the grant date of March 2020 until August 2020 “during which time our stock price had significantly increased.” The proxy statement continues, “The values at grant in March 2020 differ from the Summary Compensation Table (SCT) values because the PRSU value in the SCT represents the grant date fair value at the time goals were set in August 2020 as required under SEC rules.” Shareholders will likely object to the partially retroactive creation of performance metrics.

Shareholders are also likely to object to the fact that rather than evaluating the entire fiscal year results, the company “divided the bonus into the first and second half of the fiscal year. For the first half of fiscal 2020, business financial performance was below expectations and therefore, there was no bonus earned for the first half.” The company set new goals in August, however, that were exceeded for the year, resulting in an NEIC of $1.8 million

Due to Syngal’s extraordinary pay package, Gap also has the largest CEO to median worker pay ratio I have come across this year: 1:3,133. The Gap identified its median employee as “a part-time sales associate located in North Dakota” with a compensation of $7,037 in 2020. Ironically, the company references its commitment to equal pay for equal work. While this is presumably a reference to gender equity, the company nevertheless notes that it “continue[s] to conduct annual pay equity assessments that are periodically validated by a third party in order to help us target and maintain pay equity across our workforce.”

While it is obvious that the work done by a median part-time employee and a CEO are not the same, is it really three thousand times more difficult.