Abercrombie & Fitch has decided to extend CEO Mike Jeffries’ contract with one year, despite seeing its revenue dropping for a long time and share holders asking for the termination of Jeffries’ contract.
Shareholder not pleased
Jeffries’ contract started 5 years ago and was supposed to end on 1 February 2014, but has now been extended for one year. The CEO will be earning 1.1 million euro per year in the new contract, but if the company manages to reach certain goals, he might get a yearly bonus of up to 3.3 million euro. Embedded in the contract is a ‘long-term incentive’, which may culminate in a 4.5 million euro payment.
Despite these numbers, Jeffries is running a company that has lost a lot of its glamour. A&F has been losing turnover for three quarters in a row and that is partly why Engaged Capital (owning 0.5 % of the company’s stock) has been asking for his resignation. Engaged Capital is also hoping the company will be sold, something "Jeffries’ presence will hinder tremendously", according to the shareholder.
Engaged is not happy with his new contract: “This decision appears to be made without any substantive discussion with shareholders — a rushed response, less than one week after receiving our letter [to fire Jeffries]”, Glenn Welling, managing director for Engaged Capital, said in a statement directed at Abercrombie & Fitch’s board.
(Translated by Gary Peeters)