Kalms agrees to cut rolling contract from five to three years: Dixons denies shareholder pressure as it trims directors' employment terms

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The Independent Online
STANLEY KALMS, chairman of Dixons, has agreed to reduce his rolling service contract from five years to three years, writes Gail Counsell. The high-street retailer said the move was 'in line with current practice'.

John Clare, chief executive, said the move had not been prompted by specific pressure from any shareholder but because Dixons was aware of 'general comments and trends in the market place'.

The decision, taken by Dixons' remuneration committee of non- executive directors, is likely to attract criticism for not going far enough.

But Mr Clare said: 'In one step at one time it's a significant move to have made. In my view it is not unreasonable for a chairman of such long standing who founded the business and took it public to have a contract which is three years long. It is one year longer than other directors.'

The Dixons accounts show that the contracts of Mr Clare and Robert Shrager, another director, have been reduced from three years to two, while that of Mark Souhami, the part-time deputy chairman, is cut to nine months. The move follows a number of controversial, multimillion-pound pay-offs to chairmen and chief executives which have attracted widespread criticism.

A campaign against three-year rolling contracts has been led by Alastair Ross Goobey, who runs PosTel, the biggest UK pension fund. He believes the pay-offs would be much lower if the contracts on which they are based were shorter.

When the issue was considered by the Cadbury committee on corporate governance, the National Association of Pension Funds argued that one-year rolling contracts should be the norm. The Cadbury committee disagreed, suggesting service contracts should not exceed three years without shareholder approval, although the matter is likely to be reconsidered when the code is revised next year.

Dixons is also planning to introduce annual retirement for directors by rotation. Shareholders will be asked to vote for the change at the annual meeting on 8 September.