Abercrombie CEO Hears No Evil as Angry Shareholders Vote for Change
Like an imperious pasha, Abercrombie & Fitch (ANF) CEO Michael Jeffries defiantly presided over the company's annual meeting yesterday, proclaiming he would not entertain any questions about why his pay has skyrocketed to more than $36 million even as Abercrombie's rofits plunged. He'd do well to start listening -- two proposals put up by angry shareholders passed, and one of two compensation-committee board members shareholders targeted for removal only kept his seat by a small margin.
Superagent Ed Limato got 37.5 million confirming votes and 35.5 million against, a strong showing of disapproval. In the future, the company's shareholders will likely have more opportunities to remove board directors, as they passed a proposal requesting all board members to be elected annually. Shareholders will no doubt be frustrated with how slow this change rolls out, though -- the company only agreed to put it to a shareholder vote again next year, and even if that gets approved, the change only takes effect as current three-year terms expire. So Limato still won't be up for a vote again until 2013. Also defeated at the meeting was a company proposal to institute a new long-term incentive plan that would hand out more stock to executives. Opposing investors, including the pension plan of union AFSCME, said the plan would dilute their shareholdings too much.
For perspective, activists don't often succeed with these kind of proposals. The governance-consulting firm RiskMetrics Group reported in a client newsletter this morning that the defeat of the Abercrombie pay proposal is the first successful "no" vote on a pay plan at a public company this year. Out of 271 similar stock-reward proposals made last year, only one was defeated. RiskMetrics also described the size of the vote against Abercrombie's board members as "among the most significant at a large-cap firm this season," even though it didn't achieve a majority.
Translation: Abercrombie & Fitch's shareholders are really, seriously angry. Jeffries' reign may not continue much longer if the company's performance doesn't improve, or the board won't get executive pay into line with the company's current reality.
Strangely, another shareholder proposal to strip Jeffries of his chairman of the board title in favor of electing an independent chair didn't do as well as other initiatives, getting about 27 percent support. That change could have helped weaken Jeffries' grip on the board and made directors more responsive to shareholder concerns.
Photo via Flickr user yeowatzup Related: