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[4 comments]

A&F splits CEO and chairman roles

January 29, 2014

There has long been a debate in corporate governance circles whether consolidating the power of the chief executive's office with that of board chairman is ultimately in the best interest of companies and their shareholders. Yesterday, the board of Abercrombie & Fitch voted with those who advocate for split roles when it took the chairman title away from embattled CEO Michael Jeffries.

Last month, the board gave a new contract to Mr. Jeffries who has been criticized by analysts and investors for A&F's lackluster performance in recent years. The chain has only achieved one quarterly increase in same-store sales over the past seven quarters.

A&F's board appointed former Sears and Saks Fifth Avenue executive Arthur Martinez to assume the role of chairman effective immediately.

Corporate governance expert Eleanor Bloxham called that the A&F board's action "historic" in an interview with The Columbus Dispatch. She added, "I know it will please shareholders and help the board execute a succession plan they intend to work on."

"Separating the chairman and CEO functions addresses recent shareholder concerns over leadership and also brings fresh perspective going forward," Jefferies analyst Randal Konik told Reuters.

FINANCIALS:     [NYSE:ANF] [ ]

Discussion Questions:

Do you think separating the role of CEO and chairman is a better method for managing a retail company rather than having one person hold both titles? What do you think the splitting of duties will mean for Abercrombie & Fitch's business moving forward?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you generally support or oppose having one person hold the titles of CEO and chairman?

Comments:

There is no "right answer" about whether the chair/CEO split is the most effective way to good governance. In this particular case, however, it's a clear -- and long overdue -- signal that Mr. Jeffries has not been answerable to anybody for years. The puzzle is in the timing: Given the long history of weak performance at A&F, why the change in corporate structure right after awarding a new contract to the CEO?

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Dick Seesel, Principal, Retailing In Focus LLC

The person who is unusually capable of being the driving force in a company can usually handle the duties of both positions providing the board has a specific scorekeeper with the explicit power to hold accountable the single two-way leader. If that doesn't or can't exist, a separate chairman and CEO is necessary.

The title of a key position is not as important as the innovative vision and the sustainable drive of the CEO. Splitting the duties at A&F will mean little if there is not a blood transfusion pumped into its future vision. Additionally, not improving same store sales in only one of the last seven quarters raises the question of what is the role of A&F's board members?

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Gene Hoffman, President/CEO, Corporate Strategies International

Corporate governance is an interesting topic that "splits" across the Atlantic. In the US, about 37% of S&P 500 in 2012 had separate Chairmen and CEOs, while on the other side of the Atlantic the split is closer to 80% with German and Dutch companies using two-tier boards to separate the roles. Separating CEO and Chairman provides greater transparency to decisions and better protection of shareholders' interest. In practice, there's been mixed results on the performance of separating vs. combining the roles.

It's just good and responsible business to separate the roles, and have each focus on different aspects of the company's performance. It makes little sense to combine the roles when all is well in the business and then separate them when change is required. Imagine how handicapped the board is when all the power is placed in a single individual (especially if you also add the role of president) when business change is necessary but that person's commitment to a specific direction won't allow a dissenting view? On the other side, those favoring combining the roles point to greater authority, confidence and alignment in setting and executing company strategy.

In the case of A&F, it means they'll have a clear runway to make strategic business changes and refocus the company for future growth - if they choose to do so.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

A Board of Directors for companies both publicly and privately held is generally comprised of significant investors in the company. The only interest in the business is financial. Sometimes vendors, customers and in some cases competitors in search of merger and acquisition may be included on the board. But they are there for a voice and vote in favor of protecting their investments.

The Executive Committee is comprised of individuals with expertise in running the business, whatever that may be. Anyone with the ownership of both Chairman of the Board of Directors and Chief Executive Officer will most certainly seek to serve his/her own desires as a priority. When the obvious becomes apparent, a separation of responsibilities with prejudice is the most likely outcome, just like we have in this topic. Most investors and employees are oblivious to this duality until the company profit hits the fault line. Then we see a company-wide political upheaval and in extended situations, an exodus of hard to find and expensive talent.

Well structured highly efficient companies avoid this potential drama at all costs except as a temporary measure to sustain normal business relations after a sudden and radical realignment has taken place. This was very overdue and should be a lesson to all.

'gjarnoldjr'

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