Boots moves to avoid pay row

Boots, the high street retailer, moved to head off potential embarrassment over its chief executive's pay yesterday by saying it would no longer grant share options to directors and would shorten directors' contracts from three to two years.

The announcement was made as details emerged that Boots's chief executive, Sir James Blyth, was paid pounds 888,000 last year in salary and bonuses compared to pounds 680,000 the year before. The package was boosted by a pounds 350,000 long- term incentive bonus. His basic salary was pounds 530,000.

The pay package hoists Sir James higher up the table of Britain's retail earners, challenging Sir Ian Maclaurin of Tesco and Sir Geoff Mulcahy of Kingfisher, the Woolworths and Comet group. Coming a day after the riotous scenes at British Gas's annual meeting over the pay of its chief executive, Cedric Brown, Boots was sensitive to criticism. Sir Michael Angus, chairman, defended the payments: "I think pounds 500,000 is the right sort of pay for this kind of job." He said bonus payments were related to shareholder returns.

Sir James rolled his eyes skywards when questioned on his remuneration, saying only: "I'm paid sensibly for what I do."

The long-term incentive scheme was introduced in April 1991 and is based upon total returns to shareholders. This includes share-price movement and dividends paid over a four-year period compared to other retail and pharmaceutical companies.

Boots said yesterday that over a five-year period it ranked second only to Marks & Spencer in total shareholder returns, ahead of Glaxo, Sainsbury and WH Smith.

The pounds 350,000 paid to Sir James under the current scheme is the bulk of the long-term bonus payment . Other smaller payments will be made in the next few years. A new long-term scheme has been introduced.

Sir Michael Angus, who also sits on the Greenbury committee on executive pay, said Boots had made several important changes to the way its directors would be rewarded.

Share options would no longer be given and directors would have to receive part of any future bonuses in shares. "Stock options are on their way out," Sir Michael said.

According to last year's annual report, Sir James holds options on 410,000 shares, which, at yesterday's share price of 510p, would yield a profit of nearly pounds 500,000.

The pay issue surfaced as Boots announced an 8 per cent rise in pre-tax profits to pounds 849m for the year to April. The figures were boosted by pounds 320m in exceptional items arising from the sale of Boots Pharmaceuticals to BASF of Germany and the sale of Farley to HJ Heinz.

Boots the Chemist increased profits by 8 per cent to pounds 349m though the company said that high street trading conditions remained tough. The re- launch of the No7 range of cosmetics in February to target more upmarket customers had been successful. Boots opened 36 stores during the year and plans to open a further 45 this year.

Do It All, the DIY joint venture with WH Smith, remained in loss but the company said it had no plan to sell the business.

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