Children’s Place Retail Stores will restate results by as much as $24 million for fiscal years 2003 through 2005 and the first fiscal quarter of 2006 after an internal review determined that it had used incorrect measurement dates for certain stock option grants.
“The company did not maintain appropriate governance and other internal controls, which resulted in errors in the dating of options and other irregularities in option grants,” the company stated in a regulatory filing.
In many instances, Children’s Place elaborated, options were dated before all grant-making processes were finalized. As a result, the exercise price was lower than it should have been, and incorrect charges were taken for financial reporting purposes.
In the filing, the company asserted that “there was no conclusive evidence of intentional backdating” or other grant-related misconduct, and “no evidence of an intent to mislead about option grant dates or exercise prices.” Even so, the filing also stated that “in a few instances,” Children’s Place “may have selected grant dates with a view toward upcoming disclosures.”
The company stated that all non-management members of the board, as well as executives Ezra Dabah, Steve Balasiano, and Neal Goldberg, have voluntarily agreed to have their options appropriately repriced.
Children’s Place also announced that it would split the positions of chairman and chief executive officer. Dabah will remain CEO and, while relinquishing the chair, remain on the board; lead director Sally Frame Kasaks will chair the board in the interim. After the board is expanded to include two new independent directors, the company added, an independent director will be elected to serve as chairman.
At the board’s request, Balasiano has relinquished his responsibilities as chief administrative officer, general counsel, and secretary, effective immediately. He will continue as a senior vice president with supervisory responsibility for the company’s real estate, construction and facilities, store design, and non-merchandise purchasing.
Further, senior vice president and chief financial officer Susan Riley will assume the new position of executive vice president for finance and administration. Riley will be responsible for supervising finance, treasury, accounting, legal, and human resource functions, reporting to the CEO and the board.
A copy of the report is being provided to the Securities and Exchange Commission, which is already investigating the company’s stock option practices.