Kontoor updates executive severance package

A revamping of Kontoor Brands Inc.'s executive severance packages that clarifies base salary and cash incentive compensation, as well as COBRA health insurance coverage, has analysts questioning the reasoning and the timing.

The Greensboro manufacturer of Lee and Wrangler jeans has about 2,800 employees in the U.S., including 1,000 at its Greensboro headquarters and a major distribution center in Mocksville with 360 employees.

Kontoor disclosed in a Feb. 13 regulatory filing its board of directors authorized the new executive severance plan. To be eligible for benefits under the severance plan, executives must execute a participation agreement.

For Scott Baxter, Kontoor's chairman, chief executive and president, he would qualify for two years of base salary continuation if his employment as chief executive is a qualifying termination without cause, or an employee-led termination "for good reason."

Baxter would be eligible for up to 18 months of COBRA health insurance coverage.

Baxter was paid $1.28 million in base salary in fiscal 2024, the latest annual report from Kontoor. When including stock awards valued at $7.66 million on the date they were awarded, and $3.38 million in incentive pay, his total compensation was $12.59 million.

For executive vice presidents, they would be eligible for up to 18 months' worth of base salary continuation and up to 12 months of COBRA. Senior vice presidents would be eligible for up to 12 months' of base salary continuation and up to nine months of COBRA.

There also would be a lump-sum cash incentive payment pro-rated based on actual performance.

Kontoor could not be reached for comment on the reasoning for the new executive severance package plan.

BNP Paribas analyst Laurent Vasilescu said in response to the filing that it could signal another round of executive departures.

Kontoor has had two chief operating officers step down — in April 2024 (Christopher Waldeck) and in September 2025 (Tom Waldron).

As part of his severance package, Waldron was to be paid $1.35 million, equal to 18 months of his previous base salary, as well as prorated cash incentive and reduced cost for COBRA health benefits coverage.

Vasilescu said the latest Kontoor executive compensation disclosure is a new guideline for exiting executives.

"Are we going to see additional executive departures?" Vasilescu asked.

"If so, we believe this would be troublesome, considering the company made a transformative acquisition with Helly Hansen less than a year ago, and Lee's topline continues to decline mid-single digits/ high-single digits."

Examples of employment being terminated with cause include:

Failure, neglect or refusal to perform lawful employment duties, other than due to disability;

Commission of certain willful, intentional or grossly negligent acts;

Violation or failure to comply in any material respect with certain rules or policies;

Commission of an act constituting a felony or misdemeanor involving fraud, theft, deceit or any other form of dishonesty;

Misappropriation or embezzlement of company property; and

Breach of any material provision of any applicable agreement with the company or its affiliates.

Importantly, the executive compensation changes are "outside of the context of a change in control."