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Photo: Richard Levine/Getty Images

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Why Urban Outfitters’ Boys’ Club Is a Problem

The popular retailer’s board is nearly all older, white, and male — and shareholders aren’t happy.

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Quick: What’s the first thing that comes to mind when you think of shopping at Urban Outfitters? Is it “too much money for something I can get for half the price at a thrift store and have it be way more authentic?” Is it “I still can’t get over that tasteless Kent State sweatshirt with the bloodstain on it?” Is it “I bought that book of poems written by cats there?” Or how about... oldish white dudes?

As CtW Investment Group’s executive director, Dieter Weizeneggerc recently pointed out in a letter to shareholders, that’s predominantly what the grand puppet masters of Urban Outfitters, Inc. — parent company of Urban Outfitters, Free People, and Anthropologie — look like. The firm criticized the parent company for its “extreme insularity. If you’ve taken a glance at its website, which features its board of directors depicted as cutesy illustrations (the kind you’d probably find in a book sold at Urban Outfitters, naturally), this isn’t exactly new news. But, lest you worry about total male domination, there are two females on the board — one of whom is Chief creative officer of Urban Outfitters, Inc. and Free People CEO Margaret Hayne, who’s also CEO Richard Hayne’s wife, so take that for what you will.

Photo: Richard Levine/Getty Images

What makes this pointed observation noteworthy is not just that a firm is reminding shareholders to wake up to the idea that diversity could (shocker!) improve business, but also that CtW is calling for two of Urban Outfitters’ longest-standing board members, Robert Strouse and Harry S. Cherken Jr., to not be re-elected at the company’s forthcoming meeting on May 23rd. Additionally, CtW is blaming the company’s lack of growth and poor stock performance on having such a homogenous board, and is stating that not responding to pressure to change the board deems the brand uninterested in improving its business. Urban Outfitters said in a statement that CtW’s claims are not bolstered by facts, adding that the board isn’t to blame for these problems since “the entire sector is currently facing structural headwinds” while also pointing out that the board is operated by more than 20 percent women. The company also stressed that it can’t change the board “overnight” and that it has been “taking targeted, strategic steps to alter the makeup of the board over time.”

But in reality, it’s been a lugubrious process. Margaret Hayne, the company’s first-ever female director (and a company executive), was added in 2013, after shareholders implored for increased diversity. But the first-ever outside female director, Elizabeth Ann Lambert, wasn’t even added until 2014. This came after a written proposal from shareholders asking Urban to look outside its own company and to diversify its board to more accurately represent its consumers, who are not men over 60.

So needless to say, this isn’t Urban Outfitters’ first time being called out for its white boys’ club of a board room, and it’s not like Urban Outfitters has stellar performance to show for resisting to change. In Urban Outfitters’ most recent quarter, same store sales for the entire parent company were flat. Urban’s stores — which are often based in malls, an ailing breed — are already in a difficult position due to shifting consumer behaviors (namely: online shopping and low prices across the board). CEO Hayne is not blind to those changes, either; he acknowledged on an earnings conference call that “[...] added to this underlying uncertainty is the risk brought on by digital disruption and deflationary pricing pressures. This creates a new level of risk.” Yes, it’s true: It’s hard to be a mall brand in 2017. (Urban announces earnings for the first quarter of fiscal 2018 on May 16th.)

To be fair to Urban Outfitters, the company has made moves to amp up the experience of shopping in its stores. Unlike other mall brands like Gap or J.Crew, Urban has made plays — like incorporating restaurants in its stores — to make shopping at its physical stores a must, thereby demanding (or at least quietly pleading for) foot traffic. It bought Pizzeria Vetri in 2016, though to Urban’s detriment, that’s operated by Marc Vetri, whom Hayne has known for years — another problem within Urban, CtW says, since a publicly traded company shouldn’t act like a family business. But then go into an Anthropologie and try not to secretly sleep in a bed there.

“I think they do retail very well,” Gabriella Santaniello, founder of independent retail research firm A Line Partners, said. “You get a good vibe when you go in the store. It’s not like walking into Gap.” That said, she points to that aforementioned problematic disconnect with pricing. Prices are too high. (Santaniello concedes that issue doesn’t necessarily stem immediately from the board.)

Whether or not a diversified board can or will solve immediate company issues like stagnant sales, it does signify a lack of connection with the consumer and a disinterest in listening to its consumers and shareholders, and that’s something worth drawing attention to. It’s also hard not to draw a connection between the very high prices and the criticism of “extreme insularity” — it’s the same “you-can’t-sit-with-us” sentiment.

Ideally, board members shouldn’t be scratching their heads wondering why board diversity is crucial. It should be a no-brainer that it can help a business run more smoothly. With more diverse backgrounds come more diverse ideas, and therefore more diverse solutions to problems (which, if you’re a business and only thinking about your bottom line, is probably all you care about, not social justice and equality). "Diversity of thought and background makes for better decisions,” said Cindy Burrell, CEO of Diversity In Boards, a firm that helps companies find women and people of color to add to their boards. There’s ample no-shit research and scholarly articles out there that substantiates how adding women to your board can improve performance.

But it also conveys that companies are interested in representing their whole consumer body. It says, again, you are in touch with them, and as CtW astutely pointed out, “for a company that is so reliant on global sourcing and focused on women, it is surprising that the board consists of largely Caucasian males with law and finance backgrounds.”

Think about Urban Outfitters’ portfolio: It includes bohemian darling Free People, expensive candle destination Anthropologie, chill bride mecca BHLDN, and its semi-grungy, often offensive namesake brand. All of these brands are, in part, known for a (commoditized, mainstream) version of an alternative style — the distressed jeans at Urban conjure up an idea of a punk rock rebellion, the dreamy bohemian apparel at Free People suggests hippie vibes, which you can inherently link to protesting war. So to an extent, Urban Outfitters’ image would suggest progression. And yet here’s something that’s super retrograde: CtW, in fact, pointed to this, calling out how the lack of racial and gender diversity doesn’t make sense for a customer that’s supposedly “culturally sophisticated.” “It’s not in sync with society and… Urban Outfitters,” Santaniello said.

Photo: Cindy Ord/Getty Images

It’s almost comical when you consider how much of a call for board diversity there has been in general, beyond Urban’s shareholders. In a keynote speech at the International Corporate Governance Network Annual Conference from last June, SEC chair Mary Jo White encouraged companies to consider diverse candidates when choosing its board members: “Not only is it the right thing to do, it makes good business sense,” she said. (Remember: Unfortunately, some people don’t care about diversity unless it benefits them in the fiscal sense.)

And recently, Ernst and Young polled 50 institutional investors in a proxy season preview, and the majority stressed that gender diversity on boards should be a priority. Yet growth is staggeringly slow: In a chilling statistic, EY noted that if women continued to be added to boards at the same rate they are now, board equality would not exist for another 30 years at the minimum. Maybe my unborn daughter (haha, I’m not even pregnant!) will be on the board of some company someday!

This disturbing trend extends throughout the mall, and the rest of the mid-level mall-brand retail landscape is a mixed bag when it comes to gender diversity, which is almost ironic, when, as Santaniello noted, statistics show that more women shop at malls than men do (and again, malls are struggling).

Ralph Lauren has two women out of 10 members on its board of directors. Sure, that’s 20 percent, but that’s still not equal. Notably, though, one of Ralph Lauren’s board members is Dr. Joyce F. Brown, who made history as the first-ever African American (and woman) president of the Fashion Institute of Technology. J.Crew has one woman on its board out of eight members total. You can argue both parent companies’ portfolios skew more masculine than Urban’s does, but that only supports the argument that Urban Outfitters should have a more predominantly female board. And consider how neither other parent company has shrouded itself in selling a progressive, funky, be-yourself style (save for Madewell); if anything, you’d almost expect Ralph Lauren and J.Crew to be operated by a boys’ club that dispenses coupons for pocket squares as a sign-on bonus. And more importantly, that shouldn’t even have to be an argument: Consumers are diverse, so brands’ boards should be, too. One company that does stand out? Ascena — the parent company of female-focused retailers Loft, Lou & Grey, Ann Taylor, Lane Bryant, and more — has a board that’s 50 percent female.

So why aren’t apparel companies’ boards growing more diversified if investors and the SEC are imploring them to do exactly that? Sadly, it’s because that white boys’ club myth is a reality. “If you have all white males on a board, their natural tendency is to think of people who they know [when selecting someone new to nominate], and all of us tend to gravitate to people who are similar to us,” said Burrell, “so that is the crux of the problem.” Indeed. CtW affirmed in its letter that Urban has a “broken nomination process,” turning its boardroom into an “echo chamber.”

Though the Bro Club should be wary: Resisting diversifying a board could, in turn, isolate consumers in the long run.

Gesina Gudehus-Wittern, engagement manager of brand strategy firm Vivaldi, cautions that for a brand with a track record of being insensitive (see: Kent State), it could send a negative message. She draws a hypothetical comparison: “Imagine a toy brand with a history of safety issues being exposed as having no parents on its board. That’s not exactly a winning combination. You’d be hard-pressed to find many parents still compelled to buy from them anymore — let alone anyone to buy their stock...” (Also not helping Urban Outfitters’ plight to appear female-friendly is that it recently obliterated its flex-time hours to benefit working mothers, but that’s another debacle of a story!)

None of that is to say that will necessarily happen to Urban Outfitters — but people do vote hard with their wallets when their views don’t align with the company’s. And there’s a fair chance that many people believe that a boardroom for a predominantly women’s clothing company with a globally inspired aesthetic shouldn’t look like the cigar room of a country club in Connecticut.

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