Abercrombie & Fitch (NYSE:ANF) has signed a new contract with its chairman and chief executive, Michael S. Jeffries, just one week after shareholders publicly urged the teen retailer to replace him. The company has entered a restructured employment contract with Jeffries that will take effect when his current agreement expires Feb. 1.
Under the new contract, Jeffries's annual base salary will remain at $1.5 million and he will still be eligible for an annual bonus, subject to review every year, according to the company's filing with the Securities Exchange Commission. Furthermore, Jeffries's incentive plan has been restructured and his semiannual equity grants will be replaced with long-term incentive awards each year worth $6 million. This will be reviewed annually by the company's compensation committee.
"Today's announcement is the result of an extensive review by the Board and detailed discussion with shareholders over several months, and the specific terms of Mike's new contract reflect direct feedback from those discussions," said Craig Stapleton, Lead Independent Director of the Board at Abercrombie.
Upon hearing the news, investment firm Engaged Capital, who originally urged Abercrombie to start looking for Jeffries's replacement, was not pleased and swiftly sent a response to the announcement.
"We are disturbed that upon learning of broad shareholder support for change in Abercrombie's leadership, the Board's reaction was to ignore the information and re-sign Mr. Jeffries," wrote Glenn W. Welling, CIO & Managing Member of Engaged Capital, in a statement. "This decision appears to be made without any substantive discussion with shareholders - a rushed response, less than one week after receiving our letter. We consider this an outright dereliction of the Board's fiduciary duties. This action is further proof that our Board exists to serve one master, Mr. Jeffries, instead of the shareholders that elected them."
Jeffries, 69, became CEO in February 1992 and chairman in May 1998, after the company was spun off from its former parent, Limited Inc. (NYSE:LB). In addition to keeping Jeffries on board, the company also announced plans to create new brand president positions for Abercrombie & Fitch, abercrombie kids and Hollister in order to enhance the brands' market presence.
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