Through the Great Recession, few brands struggled as much as Abercrombie & Fitch, the company that sells preppy, casual clothes to teens and young adults. While other retailers were slashing prices to attract consumers, the company was still pushing $90 pants, and stuck to its “aspirational” marketing campaigns featuring half-naked models. The tone-deaf strategy backfired: in 2009, the company netted just $254,000, essentially running at breakeven, compared to a $273 million profit in 2008 (and a $476 million take during the heady days of 2007). Same-store sales were off 23% last year; between the beginning of 2008 and the end of 2009, Abercrombie’s stock price fell 56%. While the stock is up 41% in 2010, and same-store sales have ticked up during the current retail rebound, Abercrombie & Fitch is still buried in a deep hole.

So it would make good business sense – or at least just require common sense – for Abercrombie & Fitch chairman and CEO Mike Jeffries, who in 2008 received $71.8 million in total compensation, according to research firm the Corporate Library, to plow some money back into his company. After all, CEOs around the country have taken drastic pay and perk cuts to better fit the tenor of these tough times. For the good of Abercrombie shareholders, and the company’s battered image, Jeffries, named one of the five Highest Paid Worst Performers of 2008 by the Corporate Library (his 2009 compensation has yet to be disclosed), is one guy who could use some scaling back.

The first paragraph of an April 13 SEC filing suggests that Jeffries is taking a positive step toward that end. According to the filing, no longer will the company provide unlimited payments for the CEO’s personal travel on the company jet. Instead, Abercrombie will cap its reimbursements for the CEO’s personal travel at $200,000; still a pretty, and unnecessary, perk, but at least it’s less egregious than before. In 2008 alone, Jeffries’ personal travel cost Abercrombie $1.3 million.

Before giving Jeffries any credit, however, just keep reading. Turns out that in exchange for amending his employment contract and eliminating this perk, Abercrombie will give Jeffries, whose employment contract runs through 2013, a $4 million lump-sum payment. That’s right, the CEO of embattled Abercrombie & Fitch, one of the worst-performing brands of the recession, in no small part due to his management decisions, is actually getting paid a sum most people could only dream of just to stop using the company plane as a personal plaything. Who knew corporate self-sacrifice could be so rewarding?

Abercrombie’s move has corporate-governance experts shaking their heads. “Most companies have the message that they are eliminating pay perks, not giving the guy cash to eliminate the perk.” says Eleanor Bloxham, CEO of the Value Alliance, an advisory firm. “What’s been lost in all of this is minimal human common sense.” And after so many missteps, you can’t help but wonder if Abercrombie will ever get it back. “I just thought, What are they thinking? Really?” says Douglas Park, a Silicon Valley–based consultant. “Customers aren’t happy with them right now. Investors aren’t happy. You have to wonder what is going through their minds.”

Abercrombie isn’t doing much explaining. Three members of Abercrombie’s compensation committee – Lauren Brisky, the former chief financial officer at Vanderbilt University, Edward Limato, agent for Hollywood hotshots like Mel Gibson and Denzel Washington, and Craig Stapleton, the former U.S. ambassador to the Czech Republic and France under the George W. Bush Administration – did not respond to requests for comment. The company would only release a statement: “Abercrombie & Fitch believes the amendment to the contract is in its best interest.”

That’s no guarantee. In fact, the deal could cost the company money down the road. The amendment applies to the remaining four years of Jeffries’ deal, which expires on Feb. 1, 2014. Yes, the amendment does away with any risk that Jeffries could run the company to ruin with his pleasure travel: if he had planned to fly, say, $10 million worth of joyrides over the next four years, Abercrombie would have saved $5.2 million ($10 million minus the $4 million given to Jeffries today, and the $200,000 per year Abercrombie still has to reimburse the CEO).

But let’s use a more reasonable travel estimate. Over the past three years, Jeffries’ personal travel on the company plane has cost Abercrombie, on average, $1 million per year. Under the old agreement, $1 million over the remaining four years of the CEO’s contract would cost Abercrombie $4 million, the exact amount of the lump-sum payment given to Jeffries. Seems like a wash, but remember that the amended agreement still requires that Abercrombie reimburse Jeffries up to $200,000 per year for his personal trips. So if Jeffries keeps up his recent rate of travel of $1 million per year – which seems pretty heavy to begin with – the company would have lost four years’ worth of $200,000 reimbursements, or $800,000, over three times the profit the entire company generated in 2009. If he spends less than $1 million per year in personal plane travel – a reasonable, if not probable, possibility – Abercrombie loses even more money. “The more and more you think about it,” says Paul Hodgson, a senior research associate at the Corporate Library, “the more ridiculous it sounds.”

So unless Jeffries books a boatload of vacations over the next four years, Abercrombie & Fitch has some serious explaining to do to shareholders. Also, Jeffries needs to explain why he didn’t do the right thing and just pass on that lump-sum payment. Of course, Abercrombie’s core teen consumer doesn’t care less about the company’s pay packages. They just want to look good. “Whether or not the CEO receives a $4 million payment doesn’t impact sales,” says Edward Yruma, retail analyst at KeyBanc Capital Markets. “Stale fashions and high prices impact sales. And Abercrombie is working to fix that.” The retailer’s turnaround had better come fast. If not, Jeffries’ jet should get grounded for good.

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