Specifically, Wykoff questioned the honesty and integrity of the chain's management team in dealing with the improper collections, claiming that the company didn't properly handle the risk associated with the situation and had not adequately resolved the issue in a way that protected shareholders in the future.
Saks' Audit Committee of the board of directors conducted an internal investigation into this subject and when the committee completed the investigation in August 2005 it found that markdown allowances had been improperly collected from vendors for a period ranging from 1996 to 2003.
Saks' chairman and CEO Brad Martin noted during the meeting that the audit committee had investigated several divisions within the Saks Fifth Avenue division. The department store chain determined that vendor allowances of approximately $34,100 had been improperly collected through overcollections from falsification by merchants in one specific merchandising division. Saks agreed to repay vendors a total of approximately $48,100 during fiscal 2005, which includes the original amount plus interest 7.25% per year.
"The problem here is that there's inclusionary language here that makes it very hard for the investor community to know if this is finished and done with," Wykoff said during the meeting.
Martin countered Wykoff's assertion: "The conduct of this management team has been honest and above board, and it will continue to be as long as I'm here."
Also during the meeting, Saks' shareholders voted against a measure to enact annual elections of the company's directors, who currently serve three-year terms. The measure, which was proposed by the New York City Employees' Retirement System, was defeated by 65% of the 142 million shares outstanding. The pension fund had claimed previously that the three-year terms impacted the accountability of directors.
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