By Sabrina Escobar

A Kohl's board member resigned this week over disagreements about the retailer's governance, adding extra turmoil to a management team upended by the termination of former CEO Ashley Buchanan.

Christine Day handed in her resignation May 5. Kohl's notified the Securities and Exchange Commission on Thursday, noting the decision was "not due to any disagreements with the company on any matter relating to the Company's operations, policies or practices."

But Day did have disagreements with the company, and urged management to file a document reflecting that. The company did so Friday afternoon, attaching copies of emails documenting Day's dissent to its amended filing.

"In the 8K filing, for my departure, it would not be accurate to say I have no disagreements with the board," one of her emails, dated Thursday morning, reads. "Unfortunately I have been continually disappointed with the level of governance process. The 8k needs to reflect this."

In another email, she adds that her resignation was based on discord regarding "adherence to protocols and processes which guide conversations and ensure full transparency and accountability," and that all investors and board members should have equal access to the same information. Day joined Kohl's board in 2021 and was a member of its compensation committee, audit committee, and finance committee.

The company said in the filing it strongly disagrees with assertions in Day's emails.

The disagreements relate to how the company responded to a recommendation from Institutional Shareholder Services -- a firm that provides voting recommendations to investors -- on a pay proposal outlined in Kohl's proxy statement, Kohl's said in the filing.

The proposal lets shareholders cast an advisory vote to approve C-suite compensation. While the vote isn't binding, the board's compensation committee uses the results to determine whether to adjust pay policies. Kohl's annual shareholder meeting is May 14.

ISS initially advised shareholders vote against the payment scheme, primarily due to concerns over the "size, disclosure and structure" of then-CEO Buchanan's sign-on awards. And while Kohl's terminated Buchanan for cause last week -- which means he will forfeit his equity awards and be required to reimburse the company for a $2.5 million portion of his signing incentive -- the ISS continues to recommend shareholders cast a no vote.

"Although some shareholders may view the concerns about Buchanan's awards as being mitigated by their forfeiture, there remains concern with the company's prior decision to originally grant these large awards, which entirely lack performance criteria," the ISS's report reads. "In addition, disclosure concerns remain, as the company did not delineate what portion of the awards were meant to cover forfeited compensation from his prior employer."

Filings with the SEC at the time Buchanan was appointed revealed that he would receive an annual salary of $1.475 million and a signing incentive of $3.75 million, in addition to a combined $17 million of restricted stock and an annual long-term equity incentive award target of at least $9 million. Those terms were largely voided after he was terminated.

Buchanan assumed the role of the company's top executive this January. Kohl's Board Chair Michael Bender replaced Buchanan as interim CEO. Bender's compensation hasn't been publicly announced yet so ISS didn't factor it into its analysis.

Kohl's stock closed 4.9% lower at $6.72 Friday. The shares have shed 52% this year alone, and 72% over the past 12 months following years of same-store sales declines and lackluster profit growth.

Turmoil at the top could make it all the more challenging for the department store to right the business.

"The loss of the CEO at a time when the businesses needs stability in strategy puts the company at an even greater disadvantage, especially as it looks to navigate tariffs, inventory disruptions, negative comps, and the potential for liquidity constraints with near-term debt maturities," wrote Adrienne Yih, an analyst at Barclays, after the news of Buchanan's termination broke last week.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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May 09, 2025 17:07 ET (21:07 GMT)

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