By: Cydney Posner

Yet another derivative action has been filed in Delaware against a board of directors of a public company alleging breaches of the fiduciary duties of good faith, care, loyalty and candor, waste of corporate assets and unjust enrichment of the CEO. The complaint takes aim at the board of Abercrombie and Fitch, using as ammunition primarily the company's own compensation committee reports, juxtaposed with a nasty article about the CEO's compensation by Graef Crystal, a well-known compensation expert (or gadfly, depending on your point of view), published by Bloomberg. The complaint contrasts Crystal's scathing remarks about the CEO's generous new compensation package, notwithstanding the company's erratic performance under the CEO's leadership, with the glowing performance review provided by the compensation committee report as justification for a restated employment agreement providing, among other things, a grant of one million shares, a $12 million "stay" bonus and a SERP providing a monthly benefit for life of 50% of his final average compensation. Quoting generously from both documents, the complaint concludes that, contrary to the disclosures in the proxy statement, the CEO was not paid for "outstanding performance" or to remain "competitive" with other companies. Although not all companies find themselves to be fodder for Graef Crystal, nevertheless, this complaint may well be a harbinger of things to come in the area of executive compensation.

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