Analysis-More Than A Chairperson - Founder's Daughter Takes Zara Helm

The daughter of Inditex's billionaire founder takes the helm of his Zara fashion empire on Friday with a more hands-on role than originally expected by outsiders, though a much lower salary than her veteran predecessor.

Marta Ortega, Amancio Ortega's youngest child, will not only be non-executive chairperson, as announced in November, but will also manage the firm's communication strategy and its internal audit body, the company said in an annual report on remuneration of directors sent to Spain's stock market regulator last month.

The 38-year-old will also remain involved in managing fashion merchandise at Zara, the business that generates 70% of Inditex's revenues, the company said.

In return, Marta Ortega will receive an annual salary of one million euros ($1.1 million), the document showed - 100,000 euros for overseeing the board and 900,000 euros for her work as non-executive president.

Along with new CEO Oscar Garcia, Marta Ortega replaces veteran executive president Pablo Isla, who oversaw an eight-fold increase in Inditex's share price that saw its market value surge to almost 93 billion euros at its highest point.

He leaves with a golden handshake and a promise not to work for a competitor for two years. Inditex paid Isla 12.4 million euros in his last year with the company, more than double what he received in 2020 as the executive president, the company report shows, adding that 9.9 million euros was paid in cash.

Inditex said it determined Marta Ortega's salary based on "her knowledge of the retail business in the fashion sector and of the Inditex Group."

Though her role is not directly comparable to Isla's, Marta Ortega will still have an extensive overview of the company.

"Even if Ortega will not be in charge of the day-to-day finances, she will be at the forefront of the evaluation units that allow her to make sure things are going well," said Santiago Alvarez de Mon, a professor of leadership at the IESE business school in Madrid.

The transition comes as the world's largest fast fashion retailer by sales, having largely weathered the COVID pandemic, faces the challenge of losing revenues from Russia, where it has mothballed operations following the invasion of Ukraine, and surging inflation that will likely force it to raise prices.

Zara, and other group chains such as Stradivarius and Pull&Bear, must also deal with the rapid rise of Shein, the world's largest online-only fashion company selling cheap clothes to primarily younger customers.

In a letter to staff on her first day, Marta Ortega said she was fully committed to leading the company. "I ask for your support and patience while I continue to learn from everyone every day," she added.

JITTERS

News of Isla's departure, and his replacement by Marta Ortega and Oscar Garcia, initially sparked market jitters.

But investors were reassured a team of managers, who have been with the company for anything between 18 and 42 years, will support the new leaders.

The transition is also being closely monitored by Ortega senior, who owns 59.2% of Inditex shares, sources familiar with the process said.

Guido Stein, a Spanish author and professor on companies leadership at IESE, said it was reasonable Marta Ortega would be paid less than Isla.

"She is just starting out in that position and her family receives much more from the company's profits," he said.

Ortega senior, who retired in 2011 but remains on the board in return for an annual payment of 100,000 euros, was paid an annual salary of 600,000 euros when he headed the company and always worked alongside an executive partner.

The 86-year-old will receive 1.7 billion euros in dividends this year, sources familiar with the process said.

Isla told journalists at his last press conference in March that he had "maximum confidence in the future of the company" under the new leadership team.

Royal Bank of Canada and Deutsche Bank analysts told Reuters they did not expect much strategy change as an Ortega returns to the top of the company.

"As a family member who has been closely involved with the business over the last few years, Marta Ortega will be significantly more involved than most non-executive chairpersons would be," Deutsche Bank's Adam Courcharne said.

($1 = 0.9048 euros)