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Wall Street Journal, June 9, 2010 article

 

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MANAGEMENT   |   JUNE 9, 2010, 9:54 P.M. ET

Shareholders Vote Down Abercrombie & Fitch Incentive Plan

 

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 members.

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."

Write to Joann S. Lublin at joann.lublin@wsj.com and Elizabeth Holmes at elizabeth.holmes@wsj.com

 

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