Since the start of the recession, many private sector firms have been asking their staff to make sacrifices to try and keep costs down – employees have had to put up with pay freezes, a tighter rein on expenses, cancelled parties, even working by torchlight (or is that just us?). So it’s no wonder that US clothing retailer Abercrombie & Fitch is asking boss Michael Jeffries to try and cut down on his use of the company’s private jet. What is strange is that to compensate him for the appalling iniquity of having to slum it with the rest of us on commercial flights (albeit in first class, presumably), they’ve decided to pay him a one-off lump sum of $4m. Since that’s about five times as much as he spends on travel in the average year, we’re not convinced they’ve ‘done the math’ on this one.
Apparently – according to an A&F filing with the US Securities & Exchange Commission – Jeffries previously had unlimited use of the company’s plane, racking up average annual costs of about $850,000 between 2006 and 2008. That’s obviously a lot of money, and A&F wants to claw some of it back. So from now on, he’ll only be able to use the jet for $200,000 of travel per year, after which he’ll have to foot the bill himself.
So far, so sensible. Most big US companies have been cutting down on the lavish perks previously enjoyed by their top execs, including travel – and a £200,000 private jet budget is hardly punitive. But the odd bit is that, for reasons best known to themselves, the board of A&F has decided that this entitles Jeffries to $4m worth of compensation – on top of his current salary, stock options, pensions and so on. Jeffries has previously been named by research firm The Corporate Library as one of their five ‘Highest Paid Worst Performers’ of 2008, after taking home around $72m during a year in which the company’s stock plunged by over 70%. This won’t make him look any better value.
Jeffries has been at the helm of A&F for a long time, and is widely credited with resurrecting its fortunes by successfully repositioning it as a preppy teen brand. But it’s had a tough recession: sales were down 16% last year. So there’s no reason for him to be getting a pay rise now. Saving money would be the obvious benefit of a move like this – but based on his average annual spend, it’ll be five years before they see any financial upside. How does that make sense?
Still, presumably he’s not complaining. And disapproving though we are in principle, we wouldn’t be either, in his position. So we’re off to see if Haymarket will pay us $4m not to use a private jet this year. Wish us luck.
In today's bulletin:
Gordon Brown admits he got it wrong on bank regulation?
Intel perks up tech sector by smashing forecasts
Abercrombie & Fitch boss Jeffries gets $4m not to use his private jet
JD Sports plays it just right as profits jump 26%
EU sick pay rules hammering small business