By  on September 2, 2014

Abercrombie & Fitch Co.’s board has settled a lawsuit filed by a Florida pension plan under which the retailer will be required to beef up its corporate governance policies.

Abercrombie’s board denied any wrongdoing in the settlement, which still has to be approved by a federal district court in Ohio. The terms of the settlement call for the appointment of a chief ethics and compliance officer. In addition, executive pay will be more closely tied to performance.

Executives at Abercrombie declined comment Tuesday.

The issue of corporate governance was a point of contention by activist investor Engaged Capital, a hedge fund. Engaged’s discussions with Abercrombie’s board led to the addition of four new independent directors earlier this year. Separately, the teen retailer also divided the roles of chairman and chief executive officer. Former Sears, Roebuck & Co. chairman and ceo Arthur Martinez became non-executive chairman, with Michael Jeffries retaining the ceo post.

The settlement on Friday came shortly after the lawsuit was filed on the same day by Florida pension plan City of Plantation Police Officers’ Employees’ Retirement System. The lawsuit sought a closer tie-in between executive compensation and performance, as well as limitations of access to non-public data by third parties. It had alleged that Jeffries allowed certain privileges to his life partner, who is not an employee of the company.

While a settlement so soon after a lawsuit is filed is not the norm, it does avoid what could have been a protracted and costly litigation.

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