Certain Relationships and Related Person Transactions

Review, Approval or Ratification of Transactions with Related Persons

The Board has adopted the Abercrombie & Fitch Co. Related Person Transaction Policy (the “Related Person Transaction Policy”), which is administered by our Nominating and Board Governance Committee and the Company’s General Counsel. A copy of the Related Person Transaction Policy is posted on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com . The Related Person Transaction Policy applies to any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the Company or one of its subsidiaries participates or will participate, the amount involved exceeds or is expected to exceed $120,000, and a “related person” had, has or will have a direct or indirect interest. Pursuant to the Related Person Transaction Policy, a “related person” is any person:

 

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who is or was an executive officer, a director or a director nominee of the Company, or another associate of the Company or one of its subsidiaries determined by the Company’s General Counsel to significantly influence the management or operating policies of the Company (a “key influencer”), or an immediate family member of any of such individuals, at any time since the beginning of the Company’s last fiscal year; or

 

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who, at the time of the occurrence or at any time during the existence of the transaction, is the beneficial owner of more than 5% of the Company’s outstanding shares of Common Stock, or an immediate family member of a beneficial owner of more than 5% of the Company’s outstanding Common Stock.

Each director, each director nominee or each executive officer of the Company as well as each key influencer is to provide the Company’s General Counsel with a written list (updated when necessary) of such individual’s immediate family members and associated entities (as defined in the Related Person Transaction Policy) and, to the extent actually known by such individual, each associated entity of any immediate family member. Each director, each director nominee or each executive officer of the Company as well as each key influencer must notify the Company’s General Counsel in writing of any interest that such individual or, to the extent actually known by such individual, an immediate family member or associated entity of such individual or of such individual’s immediate family member had, has or may have, in a related person transaction. Each director, each director nominee and each executive officer of the Company and each key influencer also completes a questionnaire on at least an annual basis designed to elicit information about potential related person transactions. In addition, any related person transaction proposed to be entered into by the Company or one of its subsidiaries must be reported by the Company’s management to the Company’s General Counsel. Any potential related person transaction that is raised will be analyzed by the Company’s General Counsel, in consultation with the Company’s management and with outside counsel, as appropriate, to determine whether the transaction, arrangement or relationship does, in fact, constitute a related person transaction requiring compliance with the Related Person Transaction Policy.

Pursuant to the Related Person Transaction Policy, all related person transactions (other than those deemed to be pre-approved or ratified under the terms of the Related Person Transaction Policy) will be referred to our Nominating and Board Governance Committee for approval (or disapproval), ratification, revision or termination. Whenever practicable, a related person transaction is to be reviewed and approved or disapproved by our Nominating and Board Governance Committee prior to the effective date or consummation of the transaction. If the Company’s General Counsel determines that advance consideration of a related person transaction is not practicable under the circumstances, our Nominating and Board Governance Committee will review and, in its discretion, may ratify the transaction at that Committee’s next meeting. The Company’s General Counsel may present a related person transaction arising between meetings of our Nominating and Board Governance Committee to the Chair of that Committee, who will review and may approve or disapprove the transaction, subject to ratification by our Nominating and Board Governance Committee at its next meeting, if appropriate. If the Company becomes aware of a related person transaction not previously approved under the Related Person Transaction Policy, our Nominating and Board Governance Committee will promptly review the

 

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transaction, including the relevant facts and circumstances, and evaluate all options available to the Company, including ratification, revision, termination or rescission of the transaction, and take the course of action that our Nominating and Board Governance Committee deems appropriate under the circumstances.

No director may participate in any approval or ratification of a related person transaction in which the director or an immediate family member of the director is involved. Our Nominating and Board Governance Committee may only approve or ratify those transactions that our Nominating and Board Governance Committee determines to be in the Company’s best interests. In making this determination, our Nominating and Board Governance Committee will review and consider all relevant information available to it, including:

 

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the interest of the related person (or, if applicable, an associated entity of the related person) in the transaction;

 

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the approximate dollar value of the transaction;

 

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the approximate dollar value of the interest of the related person (or, if applicable, an associated entity of the related person) in the transaction without considering the amount of any profit or loss;

 

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whether the transaction was undertaken in the ordinary course of the business of the Company or the applicable subsidiary of the Company;

 

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whether the terms of the transaction are no less favorable to the Company or the applicable subsidiary of the Company than terms that could be reached with an unrelated third party;

 

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the methodology used in the valuation of the transaction;

 

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the purpose of the transaction and its potential benefits to the Company or the applicable subsidiary of the Company;

 

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the impact of the transaction on the related person’s independence; and

 

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any other information regarding the transaction or the related person (or, if applicable, an associated entity of the related person) that would be material to investors in light of the circumstances.

Any related person transaction previously approved or ratified by our Nominating and Board Governance Committee or otherwise already existing that is ongoing in nature is to be reviewed by our Nominating and Board Governance Committee annually.

Pursuant to the terms of the Related Person Transaction Policy, the following related person transactions are deemed to be pre-approved or ratified (as appropriate) by our Nominating and Board Governance Committee even if the aggregate amount involved would exceed $120,000:

 

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interests arising solely from ownership of the Company’s Common Stock if all stockholders receive the same benefit on a pro rata basis;

 

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compensation to an executive officer of the Company, as long as the executive officer is not an immediate family member of another executive officer or director of the Company or a key influencer and the compensation has been approved, or recommended to the Board for approval, by our Compensation and Organization Committee;

 

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compensation to a director of the Company for services as a director if the compensation is required to be reported in the Company’s proxy statement;

 

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interests deriving solely from a related person’s position as a director of another corporation or organization that is a party to the transaction;

 

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interests deriving solely from the related person’s direct or indirect ownership of less than 10% of the equity interest (other than a general partnership interest) and less than 100% of the voting interest in another person that is a party to the transaction; and

 

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transactions involving competitive bids.

 

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The Code of Business Conduct and Ethics adopted by the Board also addresses the potential conflicts of interest which may arise when a director, an officer or an associate has an interest in a transaction to which the Company or one of its subsidiaries is a party. If a potential conflict of interest arises concerning an officer or a director of the Company, all information regarding the issue is to be reported to the Company’s Chief Ethics and Compliance Officer and the Company’s General Counsel for review and, if appropriate or required under the Company’s policies (including the Company’s Related Person Transaction Policy), submitted to our Nominating and Board Governance Committee for review and disposition.

Transactions with Related Persons in Fiscal 2018

In Schedule 13G/A filings made with the SEC, FMR LLC reported that it beneficially owned more than 5% of the Company’s outstanding Common Stock as of December 31, 2017 but ceased to do so in September of 2018. Fidelity Investments Institutional Operation, Inc., an affiliate of FMR LLC, provides record-keeping and administration services for the Abercrombie & Fitch Co. Associate Stock Purchase Plan, the Abercrombie & Fitch Co. Directors’ Deferred Compensation Plan, the Company’s long-term incentive plans, the Abercrombie & Fitch Co. Savings and Retirement Plan (the Company’s 401(k) plan) and the Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan. The agreements with Fidelity Investments Institutional Operation, Inc. were negotiated in arm’s-length transactions and the beneficial ownership by FMR LLC of shares of the Company’s Common Stock has played no role in the business relationship between the Company and Fidelity Investments Institutional Operation, Inc. In addition, the Company believes the respective agreements represent standard terms and conditions for record-keeping and administration services. For providing these services, Fidelity Investments Institutional Operation, Inc. received fees during the period from February 4, 2018 to September 30, 2018 totaling approximately $580,740. These services were reviewed and approved in accordance with the Related Person Transaction Policy.

Effective October 1, 2018, Gregory J. Henchel joined the Company as our Senior Vice President, General Counsel and Corporate Secretary. Mr. Henchel’s wife is a partner in the law firm of Jones Day, which provided legal services to the Company and its subsidiaries during Fiscal 2018 and continues to do so, and had periodically provided legal services to the Company and its subsidiaries for several years prior to Fiscal 2018. For providing these services, Jones Day received fees in Fiscal 2018 totaling approximately $361,000, of which fees aggregating approximately $113,400 were paid for legal services rendered to the Company and its subsidiaries after Mr. Henchel joined the Company, and fees in Fiscal 2019 through March 27, 2019 totaling approximately $18,575. Mr. Henchel’s wife does not receive any direct compensation from the fees paid to Jones Day by the Company, her ownership in Jones Day is significantly less than 1%, and the fees paid by the Company to Jones Day in Fiscal 2018 were less than 1% of Jones Day’s annual revenues. The engagement of Jones Day was reviewed and approved in accordance with the Related Person Transaction Policy.

The Company currently has a five-year arrangement with SeriousFun Children’s Network, Inc. (“SFCN”) in which the Company committed a total pledge of no less than $7,500,000 over a five-year period from January 2016 to December 2020, in-kind products donations and a donation of service hours. In Fiscal 2018, the Company donated $3,596,604 to SFCN representing proceeds from the A&F Challenge and in-store campaigns and $1,214,239 in goods and services. Of this donation to SFCN, $840,219 in cash and $80,186 of in-kind products were distributed to Flying Horse Farms, Inc. (“FHF”), a member camp of SFCN. Ms. Horowitz joined the Board of Directors of SFCN in March 2017 and her husband joined the Board of Directors of FHF in April 2017. Under the Company’s Related Person Transaction Policy, any transaction where the related person’s interest derives solely from her or his position as a director of another corporation or organization that is a party to the transaction is considered pre-approved. To address any potential conflict of interest concerns, Ms. Horowitz has been advised not to participate, directly or indirectly, in any future discussions, negotiations or decisions by the Company’s Board, the Philanthropy Committee or any other persons associated with the Company with respect to contributions or donations proposed to be made to SFCN or FHF by or on behalf of the Company.

 

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Indemnification Arrangements with Directors and Executive Officers

The Company indemnifies the directors and the executive officers of the Company to the fullest extent permitted by the laws of Delaware against personal liability in connection with their service to the Company. This indemnification is required under the Company’s Amended and Restated Certificate of Incorporation and the Company’s Amended and Restated By-Laws, and we have entered into agreements with these individuals contractually obligating us to provide this indemnification to them.

Director Independence

The Board has reviewed, considered and discussed each current director’s relationships, both direct and indirect, with the Company in order to determine whether such director meets the independence requirements of the applicable NYSE Rules. The Board has determined that nine of the ten current directors of the Company qualify as independent under the applicable NYSE Rules. Specifically, the Board has determined that each of Kerrii B. Anderson, James B. Bachmann, Terry L. Burman, Sarah M. Gallagher, Michael E. Greenlees, Archie M. Griffin, Helen E. McCluskey, Charles R. Perrin, and Nigel Travis has no commercial, industrial, banking, consulting, legal, accounting, charitable, familial or other relationship with the Company, either directly or indirectly, that would be inconsistent with a determination of independence under the applicable NYSE Rules. In the course of reaching these determinations, the Board considered among other things:

 

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Mr. Bachmann is a former partner with EY, having retired in 2003. The Company and its subsidiaries from time to time engage EY for non-audit services, primarily in the nature of tax compliance services, information technology consulting, staff augmentation, and consulting in respect of discrete nominal compliance and accounting projects. In Fiscal 2018, the fiscal year ended February 3, 2018 (“Fiscal 2017”) and the fiscal year ended January 28, 2017 (“Fiscal 2016”), the Company and its subsidiaries paid EY and its affiliate Ernst & Young (China) Advisory Limited the aggregate amount of approximately $192,200, $358,600 and $580,400, respectively, in fees. As a retired partner with respect to EY, Mr. Bachmann has no direct or indirect interest in the business relationship or transactions between EY or any of EY’s affiliates and the Company and its subsidiaries.

 

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Mr. Griffin retired as Senior Advisor within the Office of Advancement at The Ohio State University on June 30, 2017, and previously served as the Senior Vice President of Alumni Relations at The Ohio State University, President and Chief Executive Officer of The Ohio State University Alumni Association, Inc. and an ex-officio member of the Board of Directors of The Ohio State University Foundation until June 30, 2015. The Company facilitated gifts totaling $10,000,000 over a ten-year period (2007 to 2016, with approximately $341,547 paid in Fiscal 2016 and fulfilling the $10,000,000 commitment) to The Ohio State University Foundation, which gifts were allocated to The Ohio State University Wexner Medical Center. Mr. Griffin was not involved, directly or indirectly, in the solicitation of these gifts to The Ohio State University Foundation. Since the beginning of Fiscal 2016, the Company has paid The Ohio State University fees associated with several on-campus associate recruitment activities and consulting services, the aggregate amount of which has not exceeded $45,000 over the three-year period beginning with Fiscal 2016. Mr. Griffin was not personally involved, directly or indirectly, in the determination as to whether to participate in these activities.

 

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Mr. Travis has served on the Board of Directors of Office Depot, Inc. since 2012. The Company and its subsidiaries have, from time to time, had ordinary course business transactions with Office Depot, Inc. and subsidiaries of Office Depot, Inc., in both the United States and the United Kingdom. In these transactions, the Company and its subsidiaries have made payments that in the aggregate have not exceeded $164,500 in any year since the beginning of Fiscal 2016. Mr. Travis’ only interest in the underlying business relationship arises from his service as a director of Office Depot, Inc. The service by Mr. Travis on the Board while also serving as a director of Office Depot, Inc., which has a business relationship with the Company, was approved by our Nominating and Board Governance Committee.

 

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Since the beginning of Fiscal 2016, the Company has made other charitable contributions to certain charitable organizations with which one or more of the independent directors of the Company or their immediate family members are affiliated. None of these charitable contributions has exceeded $50,000 in any year within this period.

 

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Ms. Horowitz does not qualify as independent because she is an executive officer of the Company.

There are no family relationships among any of the current directors and executive officers of the Company. Please see the text under the caption “EXECUTIVE OFFICERS OF THE REGISTRANT” at the end of “ITEM 1. BUSINESS” in Part I of the Company’s Fiscal 2018 Form 10-K for information about the Company’s executive officers.

The Board previously reviewed, considered and discussed the relationships, both direct and indirect, between the Company and each of Arthur C. Martinez and Bonnie R. Brooks, who served as directors of the Company during Fiscal 2018 from February 4, 2018 to June 14, 2018 and from February 4, 2018 to July 3, 2018, respectively, in order to determine whether they met the independence requirements of the NYSE Rules during their respective periods of service as a director in Fiscal 2018. The Board determined that each of Mr. Martinez and Ms. Brooks had no commercial, industrial, banking, consulting, legal, accounting, charitable, financial or other relationship with the Company, either directly or indirectly, that would be inconsistent with a determination of independence under the applicable NYSE Rules.

Meetings of and Communications with the Board

The Board held ten regularly-scheduled meetings of the full Board and 13 meetings of the non-management directors (in the form of executive sessions scheduled as agenda items at regularly-scheduled in-person meetings of the Board as well as separate meetings of the non-management directors) during Fiscal 2018. In addition, the Board held two special meetings during Fiscal 2018. All of the incumbent directors attended at least 75% of the Board and Board committee meetings they were eligible to attend during Fiscal 2018.

Although the Company does not have a formal policy requiring members of the Board to attend annual meetings of the stockholders, the Company encourages all incumbent directors and director nominees to attend each annual meeting of stockholders. All of the nine then incumbent directors attended the Company’s last annual meeting of stockholders held on June 14, 2018.

In accordance with the Company’s Corporate Governance Guidelines and applicable NYSE Rules, the non-management directors of the Company meet (without management present) at regularly-scheduled executive sessions at least twice per year and at such other times as the directors deem necessary or appropriate. Executive sessions of the non-management directors are scheduled as an agenda item at each regularly-scheduled in-person meeting of the Board. All meetings of non-management or independent directors are presided over by the Company Chairman. If the non-management directors include directors who are not independent, then at least once a year, the independent directors of the Company will meet in executive session and the Company Chairman will preside at each executive session.

The Board believes it is important for stockholders and other interested parties to have a process to send communications to the Board and its individual members. Accordingly, stockholders and other interested parties who wish to communicate with the Board, the non-management directors as a group, the independent directors as a group, the Non-Executive Chairman of the Board or a particular director may do so by sending a letter to such individual or individuals, in care of the Company’s Corporate Secretary, to the Company’s offices at 6301 Fitch Path, New Albany, Ohio 43054. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Stockholder/Interested Party — Non-Management Director Communication,” “Stockholder/Interested Party — Board Communication,” “Stockholder/Interested Party — Independent Director Communication,” or “Stockholder/Interested Party — Non-Executive Chairman of the Board Communication,” as appropriate. All such letters must identify the author as a stockholder or other interested party and clearly state whether the intended recipients are all members of the Board, all non-management directors, all independent directors or certain specified individual directors. Copies of all such letters will be circulated to the appropriate director or directors. Correspondence marked “personal and confidential” will be delivered to the intended recipient without opening. There is no screening process in respect of communications from stockholders or other interested parties.

 

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Board Leadership Structure

The Company’s Board is currently comprised of nine non-associate directors, all of whom are independent, and Fran Horowitz, the Company’s Chief Executive Officer. The Chairman of the Board of the Company (also known as the Company Chairman) is selected from the independent members of the Board and elected annually by a majority of the independent directors of the Company.

Terry L. Burman has served as the Company’s Non-Executive Chairman of the Board since February 3, 2018.

The Board has adopted a written description of the duties and responsibilities of the Company Chairman which include the areas of Board leadership, management liaison and stockholder outreach. In particular, in his role as the Company Chairman, Mr. Burman has the following duties and responsibilities:

 

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calling and presiding over all meetings of the Board, having set in advance the agenda which should take into account issues and concerns of all Board members;

 

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presiding over executive sessions of the independent directors, without management present, and facilitating productive and focused discussions;

 

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organizing Board discussion items and workflow;

 

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establishing procedures to govern the Board’s work, including the annual schedule of the Board;

 

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establishing agendas for all Board meetings, in collaboration with our Chief Executive Officer;

 

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consulting with all directors concerning Board agendas and information provided to the Board;

 

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overseeing the distribution of information to directors to enable the Board’s monitoring of the Company’s performance and the performance of management of the Company;

 

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promoting effective communications between the Board and management of the Company on developments occurring between Board meetings;

 

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working with the Chair of our Nominating and Board Governance Committee with respect to the recruitment, selection and orientation of new Board members and Board committee composition;

 

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leading the Board’s review of the succession plan for our Chief Executive Officer and other key senior executives;

 

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discussing the Company’s executive compensation program with the Company’s large institutional stockholders, including input and advice from the Chair of our Compensation and Organization Committee and our Compensation and Organization Committee’s independent consultant, and reporting any feedback to our Compensation and Organization Committee;

 

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coordinating the Board’s self-assessment and evaluation process and ensuring that Board members continually update their skills and knowledge required to fulfill their roles on the Board and on Board committees;

 

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coordinating periodic Board input and review of management’s strategic plan for the Company;

 

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facilitating the communication between and among the independent directors and management of the Company;

 

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briefing our Chief Executive Officer on issues and concerns arising in the executive sessions of the independent directors;

 

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coordinating and chairing the annual Board performance review of our Chief Executive Officer and communicating the results to our Chief Executive Officer;

 

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providing strategic advice to our Chief Executive Officer on operational and financial matters, as necessary;

 

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presiding over annual and special meetings of the Company’s stockholders;

 

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facilitating communications with investors on Wall Street, in collaboration with our Chief Executive Officer;

 

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ensuring that views of major investors in the Company’s Common Stock are communicated to the Board, in collaboration with our Chief Executive Officer;

 

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being available for consultation and direct communication with the Company’s stockholders; and

 

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performing such other duties as the Board delegated to him.

The Company believes that the service of Mr. Burman as the Non-Executive Chairman of the Board and Ms. Horowitz as our Chief Executive Officer has allowed for effective management of the Company’s business. In addition, the Company believes that the independent Company Chairman, together with a Board whose members (other than Ms. Horowitz) all qualify as independent including the chairs for each of our Board committees, represents the most appropriate Board leadership structure for the Company. Regularly scheduled executive sessions of the independent directors, as well as written duties and responsibilities for the Company Chairman and for each of our standing committees, support this Board leadership structure.

This structure demonstrates to all of our stakeholders, including our associates, our customers and our stockholders, that our Board is committed to engaged, independent leadership and the performance of the Board’s responsibilities. Experienced and independent Board members oversee the Company’s operations, risks, performance and business strategy. The Board believes that its strong corporate governance practices provide an appropriate balance among strategy development, operational execution and independent oversight of the Company.

Committees of the Board

The Board has five standing committees — the Audit and Finance Committee, the Compensation and Organization Committee, the Corporate Social Responsibility Committee, the Executive Committee and the Nominating and Board Governance Committee. The current members of these committees are identified in the following table.

 

Committees of the Board
Director		Audit and Finance		Compensation and Organization		Corporate Social Responsibility		Executive		Nominating and Board Governance
Kerrii B. Anderson		Chair
James B. Bachmann		X				X
Terry L. Burman								Chair
Sarah M. Gallagher						X				X
Michael E. Greenlees		X		Chair
Archie M. Griffin						Chair				X
Fran Horowitz								X
Helen E. McCluskey				X
Charles R. Perrin				X				X		Chair
Nigel Travis		X
Fiscal 2018 Meetings		15		8		3		0		8

Audit and Finance Committee

Our Audit and Finance Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Kerrii B. Anderson, James B. Bachmann and Michael E. Greenlees served as members of our Audit and Finance Committee throughout Fiscal 2018, with

 

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Mr. Bachmann serving as the Chair of our Audit and Finance Committee for all of Fiscal 2018. Nigel Travis was appointed to our Audit and Finance Committee on February 22, 2019. Ms. Anderson was appointed as the Chair of our Audit and Finance Committee effective March 4, 2019, succeeding Mr. Bachmann in that position. Charles R. Perrin served as a member of our Audit and Finance Committee during Fiscal 2018 from February 4, 2018 until June 14, 2018. The Board has determined that each member of our Audit and Finance Committee qualifies, and that during his period of service in Fiscal 2018, Charles R. Perrin qualified, as an independent director under the applicable NYSE Rules and under SEC Rule 10A-3. The Board has also determined that each member of our Audit and Finance Committee is “financially literate” under the applicable NYSE Rules and qualifies as an “audit committee financial expert” under applicable SEC rules by virtue of their respective experience which is described in the section captioned “Nominees” beginning on page 22 of this Proxy Statement. The Board believes that each member of our Audit and Finance Committee is highly qualified to discharge his or her duties on behalf of the Company and its subsidiaries.

Our Audit and Finance Committee is organized and conducts its business pursuant to a written charter, a copy of which is posted on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com . At least annually, our Audit and Finance Committee, in consultation with our Nominating and Board Governance Committee, reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board as necessary to reflect changes in regulatory requirements, authoritative guidance and evolving practices.

The duties and responsibilities of our Audit and Finance Committee are set forth in its charter. The primary functions of our Audit and Finance Committee are to assist the Board in the oversight of:

 

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the integrity of the Company’s financial statements;

 

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the effectiveness of the Company’s systems of disclosure controls and procedures and internal control over financial reporting;

 

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the compliance by the Company and its subsidiaries with legal and regulatory requirements;

 

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the qualifications and independence of the Company’s independent registered public accounting firm;

 

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the performance of the Company’s internal audit function and the Company’s independent registered public accounting firm;

 

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compliance with the Company’s Code of Business Conduct and Ethics;

 

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enterprise risk issues and enterprise risk management policies, guidelines and programs;

 

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the annual independent audit of the Company’s financial statements; and

 

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the review of the financial plans and policies of the Company.

At least annually, our Audit and Finance Committee authorizes the appointment, compensation and retention of the Company’s independent registered public accounting firm and then oversees that firm’s work, including the resolution of disagreements between management of the Company and the Company’s independent registered public accounting firm regarding financial reporting. Our Audit and Finance Committee also reviews and discusses with management of the Company and the Company’s independent registered public accounting firm the Company’s financial statements and the related disclosures to be made in the Company’s periodic reports filed with the SEC, and discusses any other matters required to be communicated to our Audit and Finance Committee by the Company’s independent registered public accounting firm under applicable Public Company Accounting Oversight Board (“PCAOB”) standards. At least annually, our Audit and Finance Committee also reviews and discusses with management of the Company, the Company’s General Counsel, the Company’s Chief Ethics and Compliance Officer, the Company’s Chief Audit Executive and the Company’s independent registered public accounting firm, the Company’s processes regarding compliance with legal and regulatory requirements and communication of and compliance with the Company’s Corporate Governance Guidelines and Code of Business Conduct and Ethics.

 

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Our Audit and Finance Committee’s annual report relating to Fiscal 2018 begins on page 110 of this Proxy Statement.

Compensation and Organization Committee

Our Compensation and Organization Committee provides overall guidance for the Company’s executive compensation policies and approves the amounts and elements of compensation for the Company’s executive officers. Michael E. Greenlees and Charles R. Perrin served as members of our Compensation and Organization Committee throughout Fiscal 2018, with Mr. Greenlees serving as the Chair of our Compensation and Organization Committee for all of Fiscal 2018. Helen E. McCluskey was appointed to our Compensation and Organization Committee on February 22, 2019. James B. Bachmann served as a member of our Compensation and Organization Committee from July 16, 2018 to February 22, 2019. Bonnie R. Brooks served as a member of our Compensation and Organization Committee during Fiscal 2018 from February 4, 2018 to July 3, 2018. The Board has determined that each member of our Compensation and Organization Committee qualifies, and that during his or her period of service in Fiscal 2018, each of James B. Bachmann and Bonnie R. Brooks qualified, as an independent director under the applicable NYSE Rules, including those specifically applicable to members of our Compensation and Organization Committee.

Our Compensation and Organization Committee is organized and conducts its business pursuant to a written charter, a copy of which is posted on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com . At least annually, our Compensation and Organization Committee reviews and reassesses the adequacy of its charter, in consultation with our Nominating and Board Governance Committee, and recommends any proposed changes to the full Board as necessary to reflect changes in regulatory requirements, authoritative guidance and evolving practices.

Our Compensation and Organization Committee’s charter sets forth the duties and responsibilities of our Compensation and Organization Committee. The primary functions of our Compensation and Organization Committee are to assist the Board in:

 

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overseeing the Company’s overall compensation structure, policies and programs, discharging the Board’s responsibilities relating to our Chief Executive Officer and other officers of the Company identified in Rule 16a-1(f) under the Exchange Act (the “Section 16 Officers”), including the Company’s executive officers, as well as other officers as determined by our Compensation and Organization Committee;

 

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assessing the results of the most recent advisory vote(s) on executive compensation by the Company’s stockholders;

 

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making recommendations to our Nominating and Board Governance Committee regarding compensation of the non-associate directors of the Company;

 

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reviewing and monitoring the Company’s organizational development strategies and practices;

 

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reviewing succession plans for our Chief Executive Officer and other Section 16 Officers, including the executive officers of the Company; and

 

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overseeing any and all welfare and retirement benefit plans for associates of the Company.

At least annually, our Compensation and Organization Committee assesses the independence of consultants, outside counsel and other advisors (whether retained by our Compensation and Organization Committee or by management of the Company) that provide advice to our Compensation and Organization Committee and whether the work performed by compensation consultants or other advisors who are involved in determining or recommending executive or director compensation has raised any conflict of interest that is required to be disclosed in the Company’s annual proxy statement.

Our Compensation and Organization Committee’s processes and procedures to determine executive compensation, including the use of compensation consultants and the role of executive officers in making

 

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recommendations relating to executive compensation, are described in the section captioned “COMPENSATION DISCUSSION AND ANALYSIS” beginning on page 57 of this Proxy Statement.

Corporate Social Responsibility Committee

Our Corporate Social Responsibility Committee provides oversight of the Company’s attention to issues of social responsibility, including diversity and inclusion, health and safety, human rights, environmental and philanthropy and the Company’s policies, practices and progress with respect to such issues. James B. Bachmann, Sarah M. Gallagher and Archie M. Griffin served as members of our Corporate Social Responsibility Committee throughout Fiscal 2018, with Mr. Griffin serving as the Chair of our Corporate Social Responsibility Committee for all of Fiscal 2018.

Our Corporate Social Responsibility Committee is organized and conducts its business pursuant to a written charter, a copy of which is posted on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com . At least annually, our Corporate Social Responsibility Committee reviews and reassesses the adequacy of its charter, in consultation with our Nominating and Board Governance Committee, and recommends any proposed changes to the full Board as necessary to reflect changes in regulatory requirements, authoritative guidance and evolving practices.

Executive Committee

Terry L. Burman and Fran Horowitz served as members of our Executive Committee throughout Fiscal 2018, with Mr. Burman serving as Chair for all of Fiscal 2018. Charles R. Perrin was appointed to our Executive Committee on June 14, 2018. Arthur C. Martinez served as a member of our Executive Committee during Fiscal 2018 from February 4, 2018 to June 14, 2018.

Our Executive Committee is organized and conducts its business pursuant to a written charter, a copy of which is posted on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com . Periodically, our Executive Committee reviews and reassesses the adequacy of its charter, in consultation with our Nominating and Board Governance Committee, and recommends any proposed changes to the full Board as necessary to reflect changes in regulatory requirements, authoritative guidance and evolving practices.

Our Executive Committee is to act on behalf of the Board in between Board meetings with respect to matters that, in the opinion of the Company Chairman, should not be postponed until the next scheduled meeting of the Board, subject to such limitations as the Board and/or applicable law may impose. In addition, our Executive Committee has been appointed by the Board to take any action deemed necessary under exigent circumstances when a quorum of the Board cannot be satisfied, subject to any limitation imposed under applicable law.

Nominating and Board Governance Committee

Sarah M. Gallagher and Archie M. Griffin served as members of our Nominating and Board Governance Committee throughout Fiscal 2018. Charles R. Perrin was appointed as the Chair and a member of our Nominating and Board Governance Committee on February 23, 2018. Terry L. Burman resigned as the Chair and a member of our Nominating and Board Governance Committee effective February 23, 2018, in connection with his election as Non-Executive Chairman of the Board of the Company. Bonnie R. Brooks served as a member of our Nominating and Board Governance Committee during Fiscal 2018 from February 4, 2018 to July 3, 2018. The Board has determined that each member of our Nominating and Board Governance Committee qualifies, and during their respective periods of service during Fiscal 2018, each of Bonnie R. Brooks and Terry L. Burman qualified, as an independent director under the applicable NYSE Rules.

Our Nominating and Board Governance Committee is organized and conducts its business pursuant to a written charter, a copy of which is posted on the “Corporate Governance” page within the “Our Company”

 

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section of the Company’s website at corporate.abercrombie.com . At least annually, our Nominating and Board Governance Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board as necessary to reflect changes in regulatory requirements, authoritative guidance and evolving practices.

The purpose of our Nominating and Board Governance Committee is to provide oversight on a broad range of issues surrounding the composition and operation of the Board, including identifying individuals qualified to become Board members, recommending to the Board director nominees for the next annual meeting of stockholders and developing and recommending to the Board a set of corporate governance principles applicable to the Company. Our Nominating and Board Governance Committee also has responsibility for making recommendations to the Board and the Chairman of the Board in the area of committee membership selection, including Board committee chairs, and overseeing the evaluation of the Board. Our Nominating and Board Governance Committee is also to annually review, receive recommendations from our Compensation and Organization Committee and make recommendations to the Board regarding the compensation for the Company’s non-associate directors. Our Nominating and Board Governance Committee also has responsibility for the implementation of the Company’s Related Person Transaction Policy.

Director Qualifications and Consideration of Director Candidates

Under the Company’s Corporate Governance Guidelines, no director is to be nominated by the Board to stand for election or re-election after reaching age 75. However, the Board may nominate such a director for election or re-election if the Board believes that such director’s service on the Board is in the best interests of the Company and our stockholders. On April 8, 2019, based on a recommendation from our Nominating and Board Governance Committee, the Board unanimously approved the nomination of James B. Bachmann for re-election to the Board and believes his continued service is in the best interests of the Company and our stockholders.

As described above, the Company has a standing Nominating and Board Governance Committee that has responsibility for providing oversight on a broad range of issues surrounding the composition and operation of the Board, including identifying candidates qualified to become directors and recommending director nominees to the Board.

When considering candidates for the Board, our Nominating and Board Governance Committee evaluates the entirety of each candidate’s credentials and, other than the age guidelines mentioned above, does not have specific eligibility requirements or minimum qualifications that must be met by a candidate. However, the Company’s Corporate Governance Guidelines provide that no member of the Board may simultaneously serve on the boards of directors of more than three public companies other than the Company unless the Board has determined, upon recommendation by our Nominating and Board Governance Committee, that the aggregate number of directorships held would not interfere with the individual’s ability to carry out his or her responsibilities as a director of the Company.

In considering director candidates, our Nominating and Board Governance Committee considers those factors it deems appropriate, including:

 

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the nominee’s independence, judgment, strength of character, ethics and integrity;

 

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the nominee’s business or other relevant experience and skills and knowledge useful to the oversight of the Company’s business;

 

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the Company’s strong commitment to diversity and inclusion at all levels of the Company; and

 

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such other factors as the members of our Nominating and Board Governance Committee conclude are appropriate in light of the needs of the Board.

The Company believes that the Board as a whole should have competency in the following areas:

 

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audit, accounting and finance;

 

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•

business judgment;

 

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management;

 

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industry knowledge;

 

•

leadership; and

 

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strategy/vision.

Depending on the current needs of the Board, our Nominating and Board Governance Committee may weigh certain factors more or less heavily. Our Nominating and Board Governance Committee does, however, believe that all members of the Board should have the highest character and integrity, a reputation for working constructively with others, sufficient time to devote to Board matters and no conflict of interest that would interfere with performance as a director.

Board Tenure

Directors who have served for a varied amount of time on our Board contribute to a range of perspectives. We have a good mix of new and long-standing directors that ensures the sharing of knowledge and experience. The Board recognizes the importance of Board refreshment to ensure that the Board benefits from new perspectives. Our commitment to Board refreshment is demonstrated by the fact that three new independent directors have joined our Board since the beginning of Fiscal 2018. The Board also benefits from directors having a range of tenures as this provides continuity and institutional knowledge. The tenures of our current Board members range from less than one year to 19 years as of the date of the 2019 Annual Meeting.

 

Board Member Skills Matrix

The following bar graph provides information regarding the members of our Board, including certain types of knowledge, experience and skills held by one or more of the directors which our Board believes are important to our Company. The list below is not exhaustive as each director has a broad array of knowledge, experience and skills.

 

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Board Diversity

During the past few years, our Nominating and Board Governance Committee has focused on ensuring continued diversity on the Board during refreshment activities by requiring that director candidate pools include diverse individuals meeting the recruitment criteria. Our director nominees range from 55 to 76 with the average age being 67.

 

 

 

While the Board and our Nominating and Board Governance Committee do not have specific eligibility requirements, other than the age guidelines mentioned above, and do not, as a matter of course, weigh any of the factors they deem appropriate more heavily than others, both the Board and our Nominating and Board Governance Committee believe that, as a group, the directors should have diverse backgrounds and

 

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qualifications. The Company believes that the members of the Board, as a group, have such backgrounds and qualifications, although the Board and our Nominating and Board Governance Committee continue to actively seek candidates who possess varied gender, racial, ethnicity, age, experience and other attributes.

Our Nominating and Board Governance Committee considers candidates for the Board from any reasonable source, including stockholder recommendations, and does not evaluate candidates differently based on the source of the recommendation. The process for seeking and vetting additional director candidates is ongoing and is not dependent upon the existence of a vacancy on the Board. Accordingly, the Board believes that this ongoing pursuit of qualified candidates functions as an appropriate director succession plan. Pursuant to its charter, our Nominating and Board Governance Committee has the authority to retain consultants and search firms to assist in the process of identifying and evaluating candidates and to approve the fees and other retention terms for any such consultant or search firm. In the retention of any third-party global executive search firm to assist in the search for Board candidates, the Company emphasizes that diversity is a priority. In Fiscal 2018, our Nominating and Board Governance Committee used a third-party global executive search firm to help identify and evaluate director candidates. Helen E. McCluskey and Nigel Travis were recommended to our Nominating and Board Governance Committee by the third-party global executive search firm retained by such Committee.

Information regarding each of our directors is set forth above under the caption “Nominees.” In addition to the specific information presented with respect to such individual, the Company believes that each of our directors has a reputation for the highest character and integrity and that our directors have worked cohesively and constructively with each other and with management of the Company. They have each demonstrated business acumen and an ability to exercise sound judgment.

Board Succession Planning

On an annual basis, the members of the Board and each Board committee conduct a confidential assessment of their performance which entails a two-part evaluation process managed by outside counsel. The assessment includes both a written questionnaire and a supplemental interview conducted by an independent third party. As part of the evaluation process, the Board reviews its overall composition, including director tenure, Board leadership structure, diversity and individual skill sets, to ensure the full Board serves the best interests of our stockholders and positions the Company for future success. The results of the assessments are then summarized and communicated back to the appropriate Committee chairs, the full Nominating and Board Governance Committee and the Company Chairman. After the evaluations, the Board and management work to improve upon any issues disclosed during the evaluation process.

Our Board is committed to effective Board succession planning and refreshment, including having honest and difficult conversations with individual directors, if necessary. We may have these conversations in connection with ongoing self-evaluations, refreshment processes, and the consideration of the annual slate of Board nominees.

Director Nominations

The Board, taking into account the recommendations of our Nominating and Board Governance Committee, selects nominees for election as directors at each annual meeting of stockholders. Stockholders may recommend director candidates for consideration by our Nominating and Board Governance Committee by giving written notice of the recommendation to the Chair of our Nominating and Board Governance Committee, in care of the Company, at the Company’s principal executive offices at 6301 Fitch Path, New Albany, Ohio 43054. The recommendation must include the candidate’s name, age, business address, residence address and principal occupation. The recommendation must also describe the qualifications, attributes, skills or other qualities possessed by the recommended director candidate. A written statement from the candidate consenting to serve as a director, if elected, must accompany any such recommendation.

In addition, stockholders wishing to formally nominate a candidate for election as a director may do so provided they comply with the notice procedures set forth in Section 2.04 of the Company’s Amended and

 

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Restated Bylaws. A nominating stockholder must be a stockholder of record on both the date of the giving of the required notice of proposed nomination and the record date for determining the stockholders entitled to notice of and to vote at the relevant meeting of the stockholders.

The notice of a nominating stockholder in respect of an annual meeting of stockholders must be in writing and delivered in person or by U.S. certified mail, postage prepaid, and received by the Corporate Secretary of the Company, at the principal executive offices of the Company, not less than 120 days nor more than 150 days prior to the anniversary date of the immediately preceding annual meeting of stockholders, which, for purposes of the Company’s 2020 Annual Meeting, means no earlier than the close of business on January 14, 2020 and no later than the close of business on February 13, 2020. The Corporate Secretary of the Company will deliver any stockholder nominations received in a timely manner for review by our Nominating and Board Governance Committee.

The informational requirements for stockholder notices with respect to the nomination of director candidates are detailed and include the disclosure of all derivative and synthetic instruments and short interests held by the nominating stockholder and such stockholder’s affiliates or associates as well as by any proposed nominee.

A stockholder providing notice of any nomination proposed to be made at an annual meeting of stockholders must update and supplement such notice, if necessary, so that the information provided is true and correct as of the record date for determining the stockholders entitled to receive notice for the annual meeting of stockholders. Such update and supplement must be delivered either in person or by U.S. certified mail, postage prepaid, and received by the Corporate Secretary of the Company, at the principal executive offices of the Company, not later than five business days after the record date for the annual meeting of stockholders at issue.

No person may be elected as a director unless he or she has been nominated by a stockholder in the manner just described or by the Board or a committee of the Board.

Nominations of Individuals for Election as Directors at the 2020 Annual Meeting Using Proxy Access

A stockholder, or group of up to 20 stockholders, that has owned continuously for at least three years shares of the Company’s Common Stock representing an aggregate of at least 3% of our outstanding shares, may nominate and include in the Company’s proxy materials director nominees constituting up to 25% of the Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Section 2.04 of the Company’s Amended and Restated Bylaws. For purposes of the Company’s 2020 Annual Meeting, notice of proxy access nominees must be received no earlier than the close of business on January 14, 2020 and no later than the close of business on February 13, 2020.

Directors Who Substantially Change Their Job Responsibility

A director must inform the Company Chairman or the Lead Independent Director, as applicable, and the Chair of our Nominating and Board Governance Committee as promptly as feasible, in advance, if the director is contemplating a change in employment, membership on another public company board of directors, or any other board membership or other change in status or circumstances that might cause the Board to conclude that the director is no longer independent, is no longer qualified to serve on the Board or might not be able to continue to serve effectively or that such service otherwise is no longer appropriate. Such prior notice is intended to permit management of the Company to conduct a preliminary analysis of the potential impact of the proposed change on the director’s independence and/or service, and for the Company Chairman or the Lead Independent Director, if applicable, and the Chair of our Nominating and Board Governance Committee to consider that analysis and, as appropriate, to consult with the director before the director commits to the proposed change. If the determination is made that the potential change constitutes a conflict of interest or interferes with the director’s ability to carry out his or her responsibilities as a director of the Company, the director must immediately submit a letter of resignation or not proceed with the potential change.

 

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If sufficient prior notice cannot be given, the director must immediately submit a letter of resignation to the Company Chairman or the Lead Independent Director, if applicable, and the Chair of our Nominating and Board Governance Committee. Upon receipt of such a letter of resignation, the Company Chairman or the Lead Independent Director, if applicable, and the Chair of our Nominating and Board Governance Committee will duly consider the matter and make a timely recommendation to the full Board of the appropriate action, if any, to be taken with respect to the resignation.

It is not the sense of the Board that in every instance a director who is contemplating a change in the director’s job responsibility or other status should leave the Board. There should, however, be an opportunity for the Board, through the Company Chairman or the Lead Independent Director, if applicable, and the Chair of our Nominating and Board Governance Committee, to review the effect, if any, of the proposed change on the interests of the Company.

Board Role in Risk Oversight

The Board oversees the management of risks related to the operation of our Company. As part of its oversight, the Board receives periodic reports from members of our Enterprise Risk Management Committee, which is comprised of senior management of the Company, on various aspects of risk, including our enterprise risk management program. The committees of the Board also oversee the management of risks that fall within their respective areas of responsibility. In performing this function, each Board committee has full access to management, as well as the ability to engage advisors. The Chair of each Board committee reports on the applicable committee’s activities at each Board meeting and has the opportunity to discuss risk management with the full Board at that time.

Our Audit and Finance Committee oversees our policies with respect to risk assessment and risk management, as required under its charter and by applicable NYSE Rules. As an extension of this role, our Audit and Finance Committee oversees the Company’s enterprise risk management framework, the risk tolerance of the Company, the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures. Our Audit and Finance Committee also receives quarterly reports from our Enterprise Risk Management Committee and the Company’s General Counsel on various issues of risk and risk management programs. In addition, our Audit and Finance Committee meets privately on a regular basis with representatives of the Company’s independent registered public accounting firm to discuss the Company’s auditing and accounting processes and management.

Our Compensation and Organization Committee assesses the incentives and risks arising from or related to the Company’s compensation programs and plans. Our Compensation and Organization Committee receives a risk assessment from its independent compensation consultant that analyzes the risks represented by each component of our executive compensation program, as well as mitigating factors, as discussed in further detail below.

Our Nominating and Board Governance Committee reviews issues related to the Company’s governance structure, corporate governance matters and processes and risks arising from related person transactions.

Our Corporate Social Responsibility Committee reviews issues related to diversity and inclusion, human rights and environmental and philanthropic matters.

Risk Assessment in Compensation Programs

Consistent with SEC disclosure requirements, management of the Company and our Compensation and Organization Committee have assessed the Company’s compensation programs. Based upon all of the facts and circumstances available to the Company at the time of the filing of this Proxy Statement, management of the Company and our Compensation and Organization Committee have concluded that there are no risks arising from the Company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the Company. This assessment was overseen by our Compensation and Organization Committee, in consultation with its independent counsel and independent compensation consultant.

 

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We reviewed the compensation policies and practices in effect for our executive officers, our senior management and our associates and assessed the features we have built into the compensation programs to discourage excessive risk-taking. These features include, among other things, a balance between different elements of compensation and use of different time periods and performance metrics for different elements of compensation. The annual cash incentive program under the Abercrombie & Fitch Co. Short-Term Cash Incentive Compensation Performance Plan (the “Short-Term Cash Incentive Plan”) for the leadership team reflects performance on Adjusted EBIT goals. The annual cash incentive program under the Short-Term Cash Incentive Plan for associates below the leadership team level reflected corporate and brand-based performance measures for Fiscal 2018. The Company has also imposed stock ownership guidelines on senior management and included clawback provisions in our cash-based incentive plans and our equity-based incentive plans which are applicable to all participating associates.

Base Salary

 

•

Each job held by an associate below the leadership team level is assessed against the competitive market, and a range of base pay (within an overall salary grade structure) is assigned.

 

•

Individual merit pay decisions are constrained by a grid which relates the size of a pay increase to a given level of individual performance and/or competitive market position, subject to aggregate caps ( i.e. , the merit increase budget).

 

•

At the leadership team level and for certain other designated officers, the Company reviews market data for the applicable position, and all pay decisions are reviewed and approved by our Compensation and Organization Committee.

Annual Cash Incentive Compensation

 

•

In Fiscal 2018, annual cash incentive payments under the Short-Term Cash Incentive Plan to all leadership team members other than Kristin Scott and Stacia Andersen were determined by overall Company performance on Adjusted EBIT goals, a critical measure of the overall operating results of the business. In the case of Ms. Scott and Ms. Andersen, in their roles as Brand Presidents, their annual cash incentive payouts were based on both overall Company results and the results of their respective Brands.

 

•

Our Compensation and Organization Committee approves all goals for the annual cash incentive program and reviews and certifies performance achievement at the conclusion of the fiscal year.

 

•

The ability for a single individual to affect overall corporate EBIT is limited to a handful of the most senior executives.

 

•

Individual awards are capped for every associate, and are subject to Compensation and Organization Committee approval and, if necessary, our Compensation and Organization Committee’s negative discretion.

Long-Term Equity-Based Incentive Plans

 

•

In Fiscal 2018, the Company granted a mix of market-based performance share awards (“PSAs”) and restricted stock units (“RSUs”) under the 2016 Associates LTIP. For leadership team members, including the named executive officers, the mix was 50% in PSAs and 50% in time-vested RSUs. Lower management levels received time-vested RSUs.

 

•

These RSU awards vest over three or four years subsequent to grant, and provide a significant retention “hold” on associates, who would forfeit considerable value should they leave the Company prior to vesting.

 

•

In Fiscal 2018, the design of the PSAs granted to the named executive officers provided for vesting based upon two performance metrics linked to the Company’s operating and stockholder return goals: Average Return on Invested Capital (“Average ROIC”) and Relative Total Stockholder Return (“TSR”) versus the S&P Retail Select Industry Index (“Relative TSR”).

 

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•

For PSAs, the time frame for measuring performance extends over three years, and three-year cliff vesting applies.

 

•

Our Compensation and Organization Committee approves all PSA goals and reviews and certifies performance achievement at the conclusion of the three-year performance cycle.

 

•

Use of complementary metrics for annual cash incentives and PSAs, as well as a variety of time frames, serves to further mitigate risk.

 

•

The Compensation and Organization Committee has approved the following changes to the Fiscal 2019 long-term incentive design: (i) the long-term incentive mix for our leadership team will shift from 50% PSAs and 50% RSUs to 60% PSAs and 40% RSUs to provide additional alignment between leadership team pay and multi-year financial results; (ii) Total Net Sales will be added as a third, equally-weighted metric for PSA grants (in addition to Average ROIC and Relative TSR) as we seek to align our performance-based compensation with our goal to accelerate the growth of our brands; and (iii) the vesting schedule for time-vested RSUs granted to members of our leadership team will be reduced from four years to three years (vesting ratably) to more closely reflect competitive practice among our peer group of similarly-sized, specialty retailers against whom we compete for talent.

Compensation of Directors

Our Board believes that compensation paid to our non-employee directors should be competitive with other retailers of comparable size and should enable us to attract and retain individuals of the highest quality to serve as our directors. In Fiscal 2018, the independent compensation consultant to our Compensation and Organization Committee reviewed and evaluated the Company’s compensation program for the non-employee directors. The Board believes that a significant portion of non-employee director compensation should align director interests with the long-term interests of our stockholders. Accordingly, non-employee directors receive a combination of cash and equity-based compensation for their service. Additionally, we believe that compensation for our non-employee directors should be commensurate with the relative workload of the Board and individual Board members. As a result, average director compensation for our Board was positioned 14% above the median of our peer group in Fiscal 2018, primarily due to the relative frequency of our Board and Board committee meetings.

Annual Compensation

Any officer of the Company who is also a director receives no additional compensation for services rendered as a director. For Fiscal 2018, directors who are not associates of the Company or its subsidiaries (“non-associate directors”) were entitled to receive and they continue to be entitled to receive:

 

•

an annual cash retainer of $65,000 for Board service (paid quarterly in arrears);

 

•

an additional annual cash retainer for each standing committee Chair and member: (i) the Chair and the members of our Audit and Finance Committee are to receive an additional annual cash retainer of $40,000 and $25,000, respectively; (ii) the Chair and the members of our Compensation and Organization Committee are to receive an additional annual cash retainer of $30,000 and $12,500, respectively; and (iii) the Chairs and the members of all other standing committees are to receive an additional annual cash retainer of $25,000 and $12,500, respectively. In each case, the retainers are paid quarterly in arrears;

 

•

an additional annual cash retainer for our Non-Executive Chairman of the Board as described below under the caption for “ Terry L. Burman  – Non-Executive Chairman of the Board Compensation ”;

 

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an annual grant of RSUs, to be granted on the date of the annual meeting of stockholders of the Company (if the non-associate directors continue to serve after the annual meeting of stockholders) and which will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of a non-associate director’s death or total disability or upon termination of service in connection with a change of control of the Company. The market value of the shares of Common Stock underlying the annual grant of RSUs on the grant date is to be $150,000. This grant,

 

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based on the market value of the shares of Common Stock underlying the RSUs to be granted, aligns with market practice and results in a consistent market value for the RSUs granted each year; and

 

•

an additional grant of RSUs for our Non-Executive Chairman of the Board as described below under the caption for “ Terry L. Burman  – Non-Executive Chairman of the Board Compensation .”

Arthur C. Martinez

In connection with the resignation by Arthur C. Martinez from the role of Executive Chairman of the Board of the Company, effective April 2, 2018 (the execution date by Mr. Martinez), the Company and Mr. Martinez entered into an agreement to set forth the terms of Mr. Martinez’s cash and equity compensation for his service as a non-associate director of the Company for the period from February 4, 2018 through the 2018 Annual Meeting held on June 14, 2018. The portion of the Executive Chairman Cash Retainer ($179,945), which would have been paid to Mr. Martinez for the period from February 4, 2018 through June 14, 2018, was forfeited. Mr. Martinez instead received (i) a pro-rated amount of the standard $65,000 annual cash retainer for non-associate directors in the amount of $23,393 and (ii) a pro-rated amount of the $12,500 annual cash retainer for members of our Executive Committee in the amount of $4,499, in each case for his service from February 4, 2018 through June 14, 2018. Mr. Martinez also received a pro-rated portion of the standard RSU grant for non-associate directors for the period from February 4, 2018 through June 14, 2018 covering 4,309 shares. A pro-rated portion of Mr. Martinez’s Executive Chairman RSU Retainer (which had been granted on the date of the 2017 Annual Meeting of Stockholders), covering 24,413 shares, for the period between February 4, 2018 and June 14, 2018, was forfeited.

Terry L. Burman – Non-Executive Chairman of the Board Compensation

In connection with Mr. Burman’s assumption of the role of Non-Executive Chairman of the Board on February 3, 2018 and his resignation as the Chair of our Nominating and Board Governance Committee effective February 23, 2018, his compensation as Chair of our Nominating and Board Governance Committee was pro-rated for the period from June 15, 2017 through February 23, 2018 to reflect his service in that role during Fiscal 2018.

In his capacity as the Non-Executive Chairman of the Board of the Company, Mr. Burman’s compensation was immediately adjusted to reflect the scope of his new role. Mr. Burman’s additional pay as Non-Executive Chairman of the Board was set to reflect the increased demands of the role given the Board’s large workload and high meeting frequency during the Company’s ongoing transformation. Mr. Burman received and will continue to receive the following compensation:

 

•

an additional annual cash retainer of $100,000 (the “Non-Executive Chairman Cash Retainer”), paid quarterly in arrears, with the amount of the Non-Executive Chairman Cash Retainer pro-rated for the period from February 3, 2018 through the date of the 2018 Annual Meeting so that Mr. Burman received $35,989 for such period; and

 

•

an additional annual grant of RSUs, with a grant date value of $100,000 (the “Non-Executive Chairman RSU Retainer”), with the Non-Executive Chairman RSU Retainer pro-rated for the period from February 3, 2018 through the date of the 2018 Annual Meeting. These additional RSUs for the pro-rated period were granted to Mr. Burman in February of 2018, with an approximate market value of $35,989, and vested on the date of the 2018 Annual Meeting.

Mr. Burman’s compensation for his role as the Non-Executive Chairman of the Board was intentionally set at the high end of the competitive market range to reflect: (i) his active Board leadership and collaboration with management during the Company’s ongoing transformation; (ii) his role in Board leadership continuity as we transition from the “Stabilizing while Transforming” phase of our strategic plan to the critical “Growing while Transforming” phase; and (iii) the Board’s continued commitment to proactive and strong governance practices.

Accordingly, and keeping in line with our philosophy that non-associate director compensation should be commensurate with the Board’s relative workload, Mr. Burman received and he continues to be entitled to

 

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receive the full amount of the annual Non-Executive Chairman Cash Retainer (paid to him quarterly in arrears) and the annual grant of the Non-Executive Chairman RSU Retainer subject to the following provisions:

 

•

RSUs representing the full amount of the Non-Executive Chairman RSU Retainer are to be granted on the date of the annual meeting of stockholders of the Company;

 

•

RSUs will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of Mr. Burman’s death or total disability or upon a change of control of the Company; and

 

•

if Mr. Burman’s service as Non-Executive Chairman of the Board ends for any reason other than his death or total disability, a pro-rata portion of unvested RSUs subject to the Non-Executive Chairman RSU Retainer will vest to reflect the portion of the year that has elapsed between the grant date and the date on which his service as Non-Executive Chairman of the Board ends.

All non-associate directors are reimbursed for their expenses for attending meetings of the Board of Directors and Board committees and receive the discount on purchases of the Company’s merchandise extended to all Company associates.

Directors’ Deferred Compensation Plan

The Company has maintained the Directors’ Deferred Compensation Plan since October 1, 1998. The Directors’ Deferred Compensation Plan was split into two plans (Plan I and Plan II) as of January 1, 2005 to comply with Internal Revenue Code Section 409A. The terms of Plan I govern “amounts deferred” (within the meaning of Section 409A) in taxable years beginning before January 1, 2005 and any earnings thereon. The terms of Plan II govern “amounts deferred” in taxable years beginning on or after January 1, 2005 and any earnings thereon. Voluntary participation in the Directors’ Deferred Compensation Plan enables a non-associate director of the Company to defer all or a part of his or her retainers, meeting fees (which are no longer paid) and stock-based incentives (including options, restricted shares of Common Stock and RSUs). The deferred compensation is credited to a bookkeeping account where it is converted into a share equivalent. Stock-based incentives deferred pursuant to the Directors’ Deferred Compensation Plan are credited as shares of Common Stock. Amounts otherwise payable in cash are converted into a share equivalent based on the fair market value of the Company’s Common Stock on the date the amount is credited to a non-associate director’s bookkeeping account. Dividend equivalents will be credited on the shares of Common Stock credited to a non-associate director’s bookkeeping account (at the same rate as cash dividends are paid in respect of outstanding shares of Common Stock) and converted into a share equivalent. Each non-associate director’s only right with respect to his or her bookkeeping account (and the amounts allocated thereto) will be to receive distribution of the amount in the account in accordance with the terms of the Directors’ Deferred Compensation Plan. Distribution of the deferred amount is made in the form of a single lump-sum transfer of the whole shares of Common Stock represented by the share equivalents in the non-associate director’s bookkeeping account (plus cash representing the value of fractional shares) or annual installments in accordance with the election made by the non-associate director. Shares of Common Stock will be distributed under the Company’s 2016 Directors LTIP in respect of deferred compensation allocated to non-associate directors’ bookkeeping accounts on or after June 16, 2016, under the Company’s 2005 Long-Term Incentive Plan (the “2005 LTIP”) in respect of deferred compensation allocated to non-associate directors’ bookkeeping accounts between August 1, 2005 and June 15, 2016, under the Company’s 2003 Stock Plan for Non-Associate Directors in respect of deferred compensation allocated to non-associate directors’ bookkeeping accounts between May 22, 2003 and July 31, 2005 and under the 1998 Restatement of the Company’s 1996 Stock Plan for Non-Associate Directors in respect of deferred compensation allocated to non-associate directors’ bookkeeping accounts prior to May 22, 2003.

Director Compensation Table

The following table summarizes the compensation paid to, awarded to or earned by, each individual who served as a non-associate director of the Company at any time during Fiscal 2018 for service on the Board.

 

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Helen E. McCluskey and Nigel Travis are not included in this table because they did not serve as directors of the Company during Fiscal 2018, having been elected as directors of the Company effective February 3, 2019. The Company’s Chief Executive Officer Fran Horowitz is not included in this table because, as an officer of the Company, she receives no compensation for her services as a director. The compensation received by Ms. Horowitz as an officer of the Company is shown in the “Fiscal 2018 Summary Compensation Table” beginning on page 76 of this Proxy Statement and discussed in the text and tables included under the section captioned “EXECUTIVE OFFICER COMPENSATION” beginning on page 76 of this Proxy Statement.

Director Compensation for Fiscal 2018

 

Name		Fees Earned or Paid in Cash				Stock Awards				Option Awards (1)				All Other Compensation (2)				Total
Kerrii B. Anderson (3)		$	82,830			$	190,278	(4)(5)		$	—				N/A			$	273,108
James B. Bachmann		$	124,437			$	145,378	(5)		$	—				N/A			$	269,815
Bonnie R. Brooks (6)		$	37,088			$	145,378	(5)		$	—				N/A			$	182,466
Terry L. Burman		$	190,000			$	278,303	(5)(7)		$	—				N/A			$	468,303
Sarah M. Gallagher		$	90,000			$	145,378	(5)		$	—				N/A			$	235,378
Michael E. Greenlees		$	120,000			$	145,378	(5)		$	—				N/A			$	265,378
Archie M. Griffin		$	102,500			$	145,378	(5)		$	—				N/A			$	247,878
Arthur C. Martinez (8)		$	27,891			$	—			$	—				N/A			$	27,891
Charles R. Perrin		$	134,229			$	145,378	(5)		$	—				N/A			$	279,607

 

(1)	None of the individuals named in this table held outstanding options at February 2, 2019.

 

(2)	The aggregate value of the perquisites and other personal benefits received by each of the individuals named in this table for Fiscal 2018 was less than $10,000.

 

(3)	Ms. Anderson became a director on February 23, 2018.

 

(4)

Ms. Anderson was granted RSUs covering 2,186 shares of Common Stock on February 23, 2018. The amount of $44,900 included in the total amount shown in this column for Ms. Anderson is reported using the grant date fair value of the award, as computed in accordance with U.S. generally accepted accounting principles (“GAAP”), of $20.54 per RSU, based upon the closing price of the Company’s Common Stock on the grant date ($20.93) and adjusted for anticipated dividend payments during the vesting period. See “Note 12. Share-Based Compensation” of the Notes to Consolidated Financial Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of the Company’s Fiscal 2018 Form 10-K, for the assumptions used in the calculation of the amount shown and information regarding the Company’s share-based compensation. The award of RSUs granted to Ms. Anderson on February 23, 2018 vested in accordance with its terms on the date of the 2018 Annual Meeting.

 

(5)

Each of the current non-associate directors, other than Ms. McCluskey and Mr. Travis who were not then serving as non-associate directors, was granted an award of RSUs covering 5,862 shares of Common Stock on June 14, 2018, the date of the 2018 Annual Meeting. In addition, Bonnie R. Brooks, who was then serving as a non-associate director of the Company was also granted an award of RSUs covering 5,862 shares of Common Stock on June 14, 2018. The amount of $145,378 shown in this column for the current non-associate directors (other than Ms. McCluskey and Mr. Travis) and for Ms. Brooks is reported using the grant date fair value of the award, as computed in accordance with GAAP, of $24.80 per RSU, based upon the closing price of the Company’s Common Stock on the grant date ($25.59) and adjusted for anticipated dividend payments during the one-year vesting period. See “Note 12. Share-Based Compensation” of the Notes to Consolidated Financial Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of the Company’s Fiscal 2018 Form 10-K, for the assumptions used in the calculation of the amounts shown and information regarding the Company’s share-based compensation. Each award of RSUs granted on the date of the 2018 Annual Meeting remained outstanding at February 2, 2019, except the award of RSUs granted to Ms. Brooks, which was forfeited upon her resignation from the Board.

 

(6)	Ms. Brooks served as a director during Fiscal 2018 from February 4, 2018 to July 3, 2018.

 

(7)

Mr. Burman was granted RSUs covering 1,753 shares of Common Stock on February 23, 2018. The amount of $36,007 included in the total amount shown in this column for Mr. Burman is reported using the grant date fair value of the award, as computed in accordance with GAAP, of $20.54 per RSU, based on the closing price of the Company’s Common Stock on the grant date ($20.93) and adjusted for anticipated dividend payments during the four-month vesting period. See “Note 12. Share-Based Compensation” of the Notes to Consolidated Financial Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of the Company’s Fiscal 2018 Form 10-K, for the assumptions used in the calculation of the amount shown and information regarding the Company’s share-based compensation. The award of RSUs granted to Mr. Burman on February 23, 2018 vested on the date of the 2018 Annual Meeting.

 

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Mr. Burman was granted an additional award of RSUs covering 3,908 shares of Common Stock on the date of the 2018 Annual Meeting. The amount of $96,918 included in the total amount shown in this column for Mr. Burman is reported using the grant date fair value of the award, as computed in accordance with GAAP, of $24.80 per RSU, based on the closing price of the Company’s Common Stock on the grant date ($25.59) and adjusted for anticipated dividend payments during the one-year vesting period. See “Note 12. Share-Based Compensation” of the Notes to Consolidated Financial Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of the Company’s Fiscal 2018 Form 10-K, for the assumptions used in the calculation of the amount shown and information regarding the Company’s share-based compensation. The award of RSUs granted to Mr. Burman on the date of the 2018 Annual Meeting remained outstanding at February 2, 2019.

 

(8)	Mr. Martinez served as a director during Fiscal 2018 from February 4, 2018 to June 14, 2018.

Corporate Governance Guidelines

In accordance with applicable NYSE Rules, the Board has adopted the Abercrombie & Fitch Co. Corporate Governance Guidelines to promote the effective functioning of the Board and its committees and to reflect the Company’s commitment to the highest standards of corporate governance. The Board, with the assistance of our Nominating and Board Governance Committee, periodically reviews the Corporate Governance Guidelines to ensure they reflect changes in legal or regulatory requirements, evolving corporate governance practices and the Board’s policies and procedures. The Corporate Governance Guidelines are available on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com .

Code of Business Conduct and Ethics

In accordance with applicable NYSE Rules, the Board has adopted the Abercrombie & Fitch Co. Code of Business Conduct and Ethics, a copy of which is available on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com . The Code of Business Conduct and Ethics, which is applicable to all associates, managers, officers and directors worldwide (including members of the Board), incorporates an additional Code of Ethics applicable to the Chief Executive Officer, the Chief Financial Officer, Controllers, the Treasurer, all Vice Presidents in the Finance Department and other designated financial associates. The Company intends to satisfy any disclosure requirements regarding any amendment of, or waiver from, a provision of the Code of Business Conduct and Ethics by posting such information on the “Corporate Governance” page within the “Our Company” section of the Company’s website at corporate.abercrombie.com .

Compensation and Organization Committee Interlocks and Insider Participation

With respect to Fiscal 2018 and from February 3, 2019 through the date of this Proxy Statement, there were no interlocking relationships between any executive officer of the Company and any entity, one of whose executive officers serves or served on our Compensation and Organization Committee or the Board, or any other relationship required to be disclosed in this section under the applicable SEC rules.

Our Compensation and Organization Committee is currently comprised of Michael E. Greenlees (Chair), Helen E. McCluskey and Charles R. Perrin. Each of Messrs. Greenlees and Perrin served as a member of our Compensation and Organization Committee throughout Fiscal 2018. Ms. McCluskey was appointed to our Compensation and Organization Committee on February 22, 2019. James B. Bachmann served as a member of our Compensation and Organization Committee from July 16, 2018 to February 22, 2019. Bonnie R. Brooks served as a member of our Compensation and Organization Committee from February 4, 2018 to July 3, 2018.

 

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