Victoria's Secret Faces Board Purge
Barington Capital CEO James Mitarotonda released his scathing letter to Donna James, Victoria's Secret board chair, calling for a leadership overhaul and foreshadowing an intense activist investor fight. The shareholder-meeting-timed missive details and derides the niche retailer's adrift strategy, stark underperformance and lax governance.
Mitarotonda's correct and his letter provides a template on serious stewardship.
And it's not the first time Victoria's Secret seized headlines in recent weeks. Last month, the company announced a cybersecurity incident which both shuttered ecommerce operations for two days and delayed its earnings call. That turmoil signals deeper lax governance concerns and danger for the new CFO.
Not surprisingly, its 2025 proxy statement reveals the toxic governance triumvirate – incentives, incompetence and indifference – that lures troublesome attention from both hackers and activists. Quietly, that latent predicament is hardly isolated nor unique.
The Barington Capital letter first lauds Victoria's Secret as 'one of the most recognized and iconic brands in the world, with tremendous visibility, consumer awareness and brand equity' but then warns has 'failed to live up to its potential since its separation from L Brands.' Since June 2021, the retailer's shares are down 57%, denting valuation by over $2.4 billion. Conversely, over the same time, a passive S&P 500 index investment returned over 42%. Such painful deficits secretly worry boards.
Beyond offering strategic and operational prioritization advice, Mitarotonda's larger aims are to derail 'rubber-stamped' director re-appointments and chastise a recent 'poison pill' adoption. Both further entrench senior leadership.
The combination is concerning, especially as the activist investor also points out, 'recent systems failures recent system failures raise fundamental questions regarding the Board's oversight of risk management and internal controls.'
Little should be a surprise after a closer look at the proxy statement.
Each director hauled in over $240,000 each last year in cash and stock compensation in 2024, with board chair James drawing over $430,000. James' re-appointment would bring her to over a quarter-century in the company's boardroom, including her time from 2003 through 2021 with Victoria's Secret's former parent company, L Brands.
Her biography says she's 'not afraid to ask tough questions and challenge management's strategies and assumptions. She engages regularly with the investor community and is a valued sounding board for the CEO and other members of the executive leadership team.' Those core competencies and extensive insider knowledge will be tested with the looming activist investor row, cybersecurity investigation, resultant remediation plans and likely shareholder litigation.
The proxy statement paints cybersecurity as a compliance exercise.
The named executive officers do not include a senior technology executive and none is listed on the company website. It's quite likely that the CIO or CTO reports either to the chief operating or financial officer. Technology leaders who report to the CEO are more likely to have greater sway in vital digital era strategic and operational decisions.
The board splits into three committees (audit, nominating and compensation), with no technology focus. Each director is categorized as 'expert, knowledgeable or familiar' across fifteen skill dimensions. None is characterized as expert in cybersecurity and six score only as familiar.
Directors Sarah Davis, Irene Chang Britt, Lauren Peters and James form the audit committee, which oversees cybersecurity. Davis, former CEO of Canadian grocery and pharmacy giant Loblaw, also worked as the retailer's CFO, but lacks any formal IT experience. Chang Britt is a past Campbell Soup divisional president, heading Pepperidge Farm. Her biography indicates, "she has deep experience in business transformation and is an expert in human capital management, branding, and marketing' – but, no public accounting nor IT experience. Peters, Foot Locker's former CFO, also serves on the board of Allegion, a 'leading security products and solutions providers' which makes and services locks and biometric devices – not cybersecurity.
Not surprisingly, the company reverts to boilerplate language in its perfunctory SEC filings. Tucked deep in its 2025 Q1 filing was this dismissal, "We continue to assess the full scope and impact of the incident. This incident has not caused a material disruption to our operations to date and we do not believe it will have a material impact to our fiscal year 2025. The investigation remains ongoing and we have incurred, and may continue to incur, expenses and other financial impacts related to this incident, which could negatively impact our future financial results.'
Lax governance undermines readiness, responsiveness and resilience. When crises occur, poor stewardship only further distracts struggling and overwhelmed c-suites.
Stock performance, regulatory reporting and fiscal management all converge at the CFO's desk. This month, Scott Sekella replaces retiring finance head Timothy Johnson. Sekella is no stranger to c-suite controversy, but even he must be puzzled by the future.
He worked his way up the FP&A ranks at Under Armour and was deposed in the litigation that led to the apparel maker's notorious $434 million settlement related to aggressive revenue reporting. His most recent position as now-bankrupt Joann Fabrics' CFO ended abruptly last summer after less than two years, requiring forfeiture of a $400,000 retention bonus.
Sekella now takes over an organization which missed its Q1 earnings date because financial records resided on the same compromised servers as retail sales. That necessary disentanglement is a goliath, nightmarish finance-IT-audit project which will require extensive cross-functional collaboration and hefty bills.
Others openly question, despite the nature of its product line, why pictures of scantily-clad models oddly adorn the pages of regulatory filings. Will a new CFO have the courage to boldly curb incessant branding?
All that adds to questions swirling about Victoria's Secret's CEO Hilary Super, who Mitarotonda criticized as someone with 'limited chief executive and public company experience, only a brief tenure in intimate apparel and does not appear to have gained the confidence of employees.' With an $8 million compensation package that incandescently towers at 880 times the median Victoria's Secret employee, Super is bound for scrutiny. Such spillover naturally spotlights all c-suite pay and performance.
That's a tough spot for any new CFO -- let alone one ballyhooed in a hiring press release as 'transformational leader with extensive and diverse retail experience delivering results, driving operational efficiencies, and executing growth strategies. He has a strong retail background and record of identifying and accelerating strategies that strengthen performance and enhance profitability which I believe make him the right partner to help lead the next chapter of growth for the company.' Peers take note.
Whatever the boardroom battle royale's outcome, insiders and outsiders should watch the drivers of digital era dominance, danger or discord closely. Who's poisonous?
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