Abercrombie Chief Agrees to Smaller Bonus to Settle Suit

Abercrombie & Fitch Co. Chief Executive Michael Jeffries agreed Monday to cut a potential $12-million bonus in half and forgo new stock options for two years to settle shareholder claims that he received excessive compensation.

Two shareholders sued in Delaware Chancery Court in February on behalf of the New Albany, Ohio-based youth-clothing retailer, saying directors wasted corporate assets by giving Jeffries annual benefits, including stock and options, that averaged $22.9 million a year in the 2001-2003 period.

In papers filed with the court Monday, lawyers for Jeffries and the directors denied wrongdoing and said they settled the suit “solely to avoid the uncertainty, harm, distraction, burden and expense” of litigation.

A $12-million bonus that would be paid to Jeffries under certain circumstances if he left after Dec. 31, 2008, was reduced to $6 million, the company said. Also, Jeffries won’t receive stock options this year or in 2006.

The settlement, which must be approved by a judge, also provides for a review of corporate governance practices and that independent directors constitute a majority on the board’s compensation committee.