NEW YORK — Two stockholders of Abercrombie & Fitch Co. got their wish on Friday when the specialty retailer’s chairman and chief executive officer, Michael Jeffries, agreed to cut a possible bonus in half to settle their claims that his compensation package was excessive.
Meanwhile, Abercrombie said on Wednesday that its chief financial officer, Susan J. Riley, will resign, effective April 15. The company said in a statement that Riley was resigning for family reasons and plans to return to her home here. Robert Singer, president and chief operating officer, will assume Riley’s role while a search for a replacement takes place.
Riley, 46, joined Abercrombie in February 2004 from The Mount Sinai Medical Center in New York, where she was cfo.
Under the terms of Friday’s settlement, Jeffries’ $12 million bonus, which would be paid to him under specific conditions if he left the company after Dec. 31, 2008, was reduced to $6 million. In addition, he will not receive stock options in calendar years 2005 and 2006. The settlement must still be approved by a judge, and a hearing was set for May, said an Abercrombie spokeswoman.
The two lawsuits that ended in the settlement were filed by two shareholders last February in a Delaware Court of Chancery on behalf of Abercrombie, which is based in New Albany, Ohio. According to papers filed with the Securities and Exchange Commission on Wednesday, the complaints alleged “that the board of directors of A&F and the members of the compensation committee of the board breached their fiduciary duties in granting stock options and an increase in cash compensation to Mr. Jeffries in February 2002 and in approving Mr. Jeffries’ current employment agreement in January 2003.”
Jeffries’ January 2003 agreement calls for a $1 million base salary, a possible annual bonus of 120 to 240 percent over his base salary, and the $12 million “stay bonus.” Also, Jeffries is entitled to one million shares of Abercrombie’s class A common stock, vested on Dec. 31, 2008, as a career share award under the company’s stock incentive plan.
Regarding the cash compensation approved in February 2002 for Jeffries, a January 2003 SEC filing states that, if Jeffries retires on or after Dec. 31, 2008, he will receive a monthly payment for the rest of his life equal to 50 percent of his final, average compensation.
The shareholders’ complaints asserted, however, “that A&F’s disclosures with respect to Mr. Jeffries’ compensation were deficient,” according to Wednesday’s SEC filing, and sought “to rescind the purportedly wrongful compensation and to set aside the current employment agreement.”
Wednesday’s filing also stated that Abercrombie and its board deny “any liability or wrongdoing with respect to all claims alleged in the litigation.” It said Abercrombie decided to settle the litigation to eliminate “substantial burden, expense, inconvenience and distraction” and “dispel any uncertainty that may exist as a result of the litigation.”
“The company is pleased to put this matter behind it and looks forward to continue to deliver value to its shareholders,” the Abercrombie spokeswoman said.
As another part of the settlement, Abercrombie will conduct a review of its corporate governance procedures, which the spokeswoman noted already was being considered earlier this year.