LONDON BRIEFING:A £15m 'golden hello' for retailer's new chief has dismayed those looking for restraint, writes FIONA WALSH
FIRST HE was the “High-Flying Dutchman”; then he was dubbed the “$1 billion man”. Now Marc Bolland, Marks & Spencer’s new chief executive, is known as the “£15 million man”.
Dutch-born Bolland, who spent almost two decades working for Heineken, earned the first nickname after transforming the fortunes of struggling supermarket chain Wm Morrison. After three years at the helm of the Bradford-based food retailer, it was announced last November that he was jumping ship to take on the biggest job in British retailing – successor to Sir Stuart Rose at M&S.
And that’s where the $1 billion tag comes from. On the day his appointment was revealed, shares in M&S leapt 6 per cent while Morrisons slid by 5 per cent, a combined swing of £600 million – or $1 billion – in values.
Now billion-dollar Bolland has earned himself a £15 million pay deal from his new employer, a deal lucrative enough to raise eyebrows even in the City, let alone an M&S staffroom.
Although his basic salary is a little short of £1 million, at £975,000, the new M&S chief will receive a bonus of up to 250 per cent of that and has been granted an “exceptional” award of shares worth 400 per cent of his salary.
On top of that, he is getting £7.5 million to compensate him for share options and bonuses lost as a result of leaving Morrisons. It is one of the largest “golden hello” deals ever to be seen in the City and, not surprisingly, unflattering comparisons are being drawn between Bolland and Britain’s overpaid bank bosses.
While the bumper pay package has dismayed those calling for restraint in the boardroom, the scale of the deal probably says more about M&S’s urgent need to secure a big-hitter than Bolland’s greed. At Morrisons, Bolland was said not to have claimed expenses as he believed he earned enough not to bill the company for taxi fares. Internal M&S candidates jostled for position during the lengthy search for Sir Stuart’s successor but, in the end, the retailer’s big institutional shareholders made it clear they wanted new blood. And that doesn’t come cheap, particularly someone of the calibre of Bolland.
Once his appointment was made public last autumn, Bolland’s bargaining position would have become even stronger, with M&S no doubt desperate to avoid any embarrassing last-minute hitches. Morrisons played hardball over his departure date and the Dutchman has been on gardening leave for some weeks. Even so, he is not due to take the reins at M&S until May 1st.
Did the retailer need to pay him quite so much, though? Over five years, Bolland’s package could be worth some £30 million, a figure that M&S’s 73,000 British employees (average annual salary: less than £13,000) must find every bit as outrageous as bankers’ bonuses or Sir Fred Goodwin’s pension arrangements.
The retailer’s largesse risks a new rift with its institutional shareholders, still tut-tutting at the way the group flouted corporate governance guidelines a couple of years ago when it allowed Rose to combine the roles of chairman and chief executive.
The investment consultancy PIRC, which advises institutional shareholders, has already voiced its displeasure, saying the practice of compensating directors for the loss of bonuses and share options when they leave one company to join another “makes a mockery” of the argument that executives must be paid well to prevent them from going elsewhere.
Although MS is smaller than Morrisons, the job is much bigger. For a start, the charismatic Sir Stuart won’t be the easiest act to follow and Bolland will need to do some serious schmoozing if he is to retain the services of disappointed internal candidates. These include the well-regarded finance director, Ian Dyson, and Kate Bostock, who heads the clothing side.
Some concerns have been raised over Bolland’s lack of experience in fashion, a world in which Sir Stuart moved with ease. But his stint at Morrisons should be put to good use in M&S’s underperforming food division, which has been losing out to Waitrose, and which has to be his top priority. Shareholders won’t get a chance to have their say on Bolland’s pay until mid-July, when M&S holds its annual meeting, by which time the new chief executive will have been in the chair for two and a half months. That might be a little early to expect results. But, as Bolland is likely to discover, the bar will be set significantly higher for a £15 million man.
Fiona Walsh writes for the Guardiannewspaper in London
