Engaged Capital is showing some muscle, pushing for more independence in the makeup of Abercrombie & Fitch Co.’s board.
This story first appeared in the February 21, 2014 issue of WWD. Subscribe Today.
The hedge fund, which owns nearly 0.6 percent of the outstanding shares of Abercrombie, on Thursday disclosed its five nominees for election to the Abercrombie board at this year’s annual meeting. The five are Alexander P. Brick, former chief executive officer of Specialty Retail Group; Robert D. Huth, former ceo of David’s Bridal; Michael W. Kramer, former chief operating officer of J.C. Penney Co. Inc. and former ceo of Kellwood Co., as well as a former executive at Abercrombie; Diane L. Neal, former ceo of Bath & Body Works and the former president at Mervyn Stores when owned by Target Corp., and Glenn W. Welling, chief investment officer and managing member of Engaged Capital.
Welling said the company needs a board of independent leaders who can “set a new direction for Abercrombie.” He added: “For far too long, stockholders have suffered under the failed leadership of a board that has lacked the independence necessary to properly act as our fiduciaries.”
Last month the teen retailer split the positions of chairman and chief executive officer and named Arthur Martinez, 74, non-executive chairman. Michael Jeffries, 69, who had been chairman for 18 years, remains chief executive officer and a director.
Abercrombie also moved to bolster its retail talent on its board, increasing the number of board members to 12 with the appointments of Martinez; Terry Burman, chairman of Zale Corp., and Charles R. Perrin, former chairman and ceo of Avon Products Inc. The three are considered independent directors.
Abercrombie’s Martinez said, “As we have communicated during numerous discussions with Engaged Capital, I am committed, and the entire [Abercrombie] board is committed, to continue taking significant steps to strengthen and enhance corporate governance as the company moves into the next phase of growth.”
Sources said all incumbent directors are expected to run for reelection. Given the length of tenure for nine incumbents, these sources said should all five of Engaged Capital’s nominees get elected, along with the three newly appointed directors earlier this month, Abercrombie’s board would be controlled by a majority of independent directors for the first time in years.
One source familiar with Engaged’s position said the hedge fund is looking for new leadership that can effect a viable strategy to turn around the company, particularly the positioning of its core Abercrombie and Hollister brands to the female consumer. This individual also said that “Engaged has never said it was pushing for a sale” of the company, and that it wants a “new team that would be open to evaluating all options to creating value” for shareholders.
Michael Appel, president of restructuring consultancy firm Appel Associates, said, “The issue at Abercrombie is whether you really have an independent board, given the current composition. They just gave Jeffries a new contract. How independent are they? Take a look at how long it took them to separate the chairmanship from the ceo position. So the question is, did the board do enough with that change, or did they do this as a defensive measure to entrench themselves?”