Abercrombie & Fitch Co. shareholders signaled their dissatisfaction
with teen retailer's pay practices by defeating a long-term incentive plan
and narrowly re-electing a member of the board's compensation committee.
ISS, a unit of
RiskMetrics Group Inc. that advises mutual and pension funds how to
vote in corporate elections, had recommended voting against the incentive
plan and two members of the compensation committee, Edward Limato and
Craig Stapleton. Shareholders representing 48.6% of the votes cast
withheld support for Mr. Limato's reelection, the company said.
"The Compensation Committee has approved poor pay practices, and there
is a pay-for-performance disconnect at the company," ISS said in its
report about the Abercrombie annual meeting. Among other things, ISS was
unhappy the company paid CEO Michael Jeffries to curtail his personal use
of the company jet. Abercrombie & Fitch declined to comment.
The incentive plan would have enabled the company to give stock awards
or options to employees throughout the company. ISS feared it would dilute
equity too quickly. Companies often avoid negative recommendations by
proxy advisers by promising they won't give out "more than a certain
amount of equity in the future," said Gary Hewitt, an ISS spokesman. In
making such a promise, Abercrombie "excluded from that commitment certain
CEO equity awards," he added. "It was not a meaningful commitment."
Mr. Jeffries received a compensation package valued at $36.3 million
last year, up from $23.2 million a year earlier. The pay package included
a salary of $1.5 million as well as options awards valued at $33.3
million. In April, Mr. Jeffries received a payment of $4 million to limit
his personal use of the corporate jet to $200,000 a year.
It's fairly unusual for shareholders to reject incentive plans, and so
the vote "is a rebuke," said John Keenan, a corporate-governance analyst
for the American Federation of State, County and Municipal Employees
union, which campaigned against the re-election of the two pay panel
ISS's Mr. Hewitt agreed. "Clearly, compensation issues drove the
shareholder votes" on both the directors and the incentive plan, he said.
"The CEO is paid too much."
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