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Dillard’s Directors Respond To Critics Seeking to fire CEO

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 31, 2008

Members of the board on the Dillard’s Inc. board of directors have rejected a demand by activist shareholders to replace CEO William Dillard II. “We believe our management team has an appropriate strategy” for dealing with current economic conditions, three outside directors elected to represent the “Class B” sharesholders – that is, the Dillard family – said in a statement issued Thursday.

Those Class B directors are Warren Stephens, CEO of Stephens Inc. of Little Rock, Peter Johnson of San Francisco and Robert Connor of Dallas. They said compensation for the management, which includes CEO William Dillard II and several of his siblings who serve as executive officers, was warranted and approved by shareholders.

Activist investors Barington Capital Group LP and Clinton Group Inc. said in an Oct. 24 letter to the three directors that the company’s “atrocious” performance over the past decade did not warrant what they called exorbitant compensation the managers received.

The groups cited a May 5 report by Proxy Governance, and independent provider of proxy advisory services that has expressed concern for Dillard’s compensation practices, that showed that executives earned 185 percent more than the median paid to executives at peer companies.

In their statement Thursday, the directors said the report’s “alleged peer group” included “companies in totally dissimilar industries.”

The trio cited a report by Institutional Shareholder Services that said the CEO’s salary was “well below the median in its peer group in 2007.”

Additionally, a report by proxy advisory service Glass Lewis & Co. said less compensation was paid to Dillard’s top officers than the median compensation for 39 similarly sized companies in the same range of enterprise value, the directors said.

The investor groups contend Dillard’s is not doing enough to improve shareholder value and that management practices are impeding the company’s performance.

William T. Dillard II
CEO/Director/Chairman of the Board
Dillard’s, Incorporated Class A
Little Rock, AR

Board Member: Barnes & Noble Inc. of New York since 1993; Acxiom Corp. of Little Rock since 1988.

Previous Position: President and COO, 1977-98. In 2002, he was named chairman of the company’s board of directors. President and COO, 1977-98. In 2002, he was named chairman of the company’s board of directors. Also, board member of Barnes & Noble Inc. of New York since 1993 and of Acxiom Corp. of Little Rock since 1988.

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