By Damion Rallis, Senior Research Associate
While one’s typical reaction to clothing retailer Abercrombie & Fitch Co. (NYSE:ANF) is to either gawk adoringly at its half-clothed models with rock-hard six-pack abs or sneer at its darkened nightclub atmosphere, here at GMI Ratings we notice a different kind of figure: the overall pay disparities among its named executive officers (NEOs). CEO and Chairman Michael S. Jeffries’ pay is so out of balance with the next four listed NEOs that it’s easy to imagine him being fed peeled grapes by young models in their underwear. But when a company chooses not only to allow its CEO to serve as Chairman, but also rewards the leader with excessive compensation, , the “emperor” metaphors begin to form on their own.
Currently, not only does Abercrombie & Fitch’s “D” rating for ESG reflect high risk over the long-term, but GMI Ratings’ Litigation Risk model has been showing warning signs about the clothier for several years. The company’s current score is 5 (on a scale from 1 to 100), meaning “High Risk” with a 5.5% probability of Class Action Litigation occurring within the next 12 months. This places A&F in the 5th percentile of all companies in North America, indicating higher shareholder class action litigation risk than 95% of all rated companies in this region. Specifically:
- Compensation & Board Practices – Our ESG rating for Abercrombie & Fitch includes red flags for Significant Vote Against Pay Practices, Combined Roles of CEO/Chairman, Extreme Pay Disparity, and Excessive CEO Perquisites
- Ownership & Control Red Flags – Strong Classified Board structure and Poison Pill
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