Neiman Marcus, Mired in Chapter 11, Cuts Executive Retirement Benefits

Fabled retailer Neiman Marcus, now in Chapter 11, has some bad news for roughly 430 current and retired executives: A chunk of their expected retirement savings, worth some $120 million in total, just got evaporated.

Making matters worse, the high-end chain’s CEO Geoffroy van Raemdonck is bagging as much as $6 million on bonuses, and he’s already picked up $4 million in bonuses. He and other top executives stand to collect as much as $10 million. The stiffed executives say that is unfair and some are threatening to sue.

“There is a strong sense of outrage among current and former employees,” a now retired executive vice president, Thomas Lind, told the New York Post. “When it became very public knowledge that the CEO got a significant bonus, there was a lot of distaste out there.” He and others are talking to a lawyer about a suit, he said.

Meanwhile, Henry Hobbs, the acting federal trustee overseeing the Neiman bankruptcy, recommended that the court reject the bonuses to van Raemdonck and his lieutenants unless the payouts can be tied to performance.

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The chain had no immediate comment on this imbroglio.

The lost retirement benefit is in the form of supplemental retirement plans for high-paid executives, which the company canceled as part of its proposed bankruptcy reorganization. Some of this money is deferred pay that the employees agreed to fork over years before. Unlike pensions and 401(k)s, these supplemental plans don’t receive government protection.

Squelching them saves the company $120 million between now and 2028, according to court filings. Depending on the person, the payouts range from $17,000 to $344,000. The people who lost the benefit can now file as unsecured creditors, like unpaid merchants that supplied Neiman with goods. They likely would receive just a fraction of what they are owed.

The supplemental benefit is separate from the company’s defined benefit (DB) pension plan covering 10,600 active, former, and retired employees, and its 401(k) program. Those plans are not impacted by the bankruptcy filing.

Neiman Marcus has fallen far. Founded in Dallas in 1907, as oil wealth was burgeoning in Texas, the department store chain was known for its extravagant Christmas catalog. One year, it was selling his-and-hers airplanes.

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Tags: 401(k), bonuses, Chapter 11, Defined benefit (db) pension plans, Geoffroy van Raemdonck, Neiman Marcus, supplemental retirement plans

The vast majority of European pension funds now consider environmental, social, and governance (ESG) risks to their investments, a significant leap from just two years ago when less than half took ESG into consideration, according to Mercer’s most recent European Asset Allocation Survey.

Results from the consulting firm’s survey found that 89% of respondents said they consider ESG risks, a sharp rise from 55% last year, and more than double the 40% of respondents who said so in 2018.

But the most notable change from 2019 was the strong rebound in climate change consideration. Last year’s survey surprised Mercer when the number of pensions considering climate change dropped to 14% of respondents from 17% the previous year. At the time, Mercer said that while the decline was “disappointing to see,” it expected the number of pensions considering climate change would bounce back this year, and it did with a vengeance as 54% of pension funds say they now consider climate change risk.

“In a year that saw activist Greta Thunberg, with others, organizing global school strikes to raise climate change awareness and witnessed vast swaths of the world on fire,” said the report, “it is not surprising that a growing number of investors are considering the investment risk of climate change.”

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Mercer said the rising consideration of ESG risks continues to be driven by the European regulatory environment. As an example, the report cited the 2017 European Pensions Directive, IORP II, and the UK’s Department for Work and Pensions’ introduction of regulations in 2018 on how trustees should consider financially material ESG risks in their investment decisions, particularly those regarding climate change.

And in May, an amendment was added to the UK’s Pension Schemes Bill that imposes requirements on trustees and managers of certain occupational pension plans to take into account the effects of climate change and to publish information relating to those effects.

But financial materiality is also playing a much more significant role in driving ESG considerations in 2020 as 51% of respondents said that was spurring their interest in ESG, up from 29% in last year.

Stewardship issues, such as voting and engagement, are also growing in importance among asset managers, according to Mercer, as they are encouraged or even pressured to disclose how they undertake these activities.

“For the first time, our survey reported over 50% of participants consider the voting and engagement aspects of investments at both the manger-selection and manager-monitoring stages of the investment process,” the report said.

However, the survey also found that, despite this milestone, only 14% have a standalone ESG/responsible investment policy, and only 5% have a responsible investment committee. At the same time, Mercer noted an “encouraging increase” in the number of investors saying they have a public commitment outlining an explicit approach to voting and engagement to 27% from 10% last year.

“It is encouraging to see such a strong increase in ESG risk awareness, including the potential impact of climate change, on the part of institutional investors,” Jo Holden, Mercer’s European director of strategic research, said in a statement. “We can see this awareness emerging as more schemes and company sponsors witness how ESG risks in their portfolios may impact investment returns and how the company and scheme is perceived by the public.”