The board of Abercrombie & Fitch Co. (New Albany, Ohio) has given ceo Michael Jeffries a new contract worth as much as $6 million a year.
The decision came amidst weakening earnings, vocal shareholder discontent with Jeffries and ongoing dissatisfaction with A&F’s suggestive marketing campaigns and Jeffries’ own public statements – especially the recent one in which he said, “We hire good-looking people in our stores. Because good-looking people attract other good-looking people, and we want to market to cool, good-looking people. We don't market to anyone other than that.”
After three straight quarters of sales declines, Engaged Capital LLC (Newport Beach, Calif.) – an Abercrombie investor – has has urged the company to start searching for a new ceo and consider selling itself to private-equity buyers. In response to the new Jeffries contract, Engaged Capital’s chief investment officer, Glenn Welling, said that his firm was considering options for holding the board accountable.
“We consider this an outright dereliction of the board’s fiduciary duties,” Welling said. “This action is further proof that our board exists to serve one master, Mr. Jeffries, instead of the shareholders that elected them.”
A&F management said the decision was the result of “extensive discussions” internally and with shareholders over several months.