Davis set to keep hold of £4m pay-off from J Sainsbury

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The Independent Online

Sir Peter Davis - the former chairman of J Sainsbury, who was ousted from the board of the supermarket giant in July - is set to keep his controversial £4m pay-off in spite of the group's attempts to reduce the severance package.

Sir Peter Davis - the former chairman of J Sainsbury, who was ousted from the board of the supermarket giant in July - is set to keep his controversial £4m pay-off in spite of the group's attempts to reduce the severance package.

Sir Peter was forced out of the company two months ago after a profits warning. During his four years at the head of the group, where he began as chief executive before moving into the chairman's role this year, Sainsbury lost market share, slipping from the second- to third-largest UK supermarket chain. His £3bn plan to update branches and the company's IT infrastructure failed to revitalise the business, and by the time of his departure, the shares were trading at similar levels to when he joined.

Following his departure, the incumbent chief executive, Justin King, sought to reduce Sir Peter's severance package, which constituted 864,000 shares, worth £2.4m, one year's salary of £500,000 and another share and options package worth up to £1.5m.

However, Sir Peter's contract, drawn up in 2003, guaranteed him a payout of up to 1 million shares should Sainsbury achieve as little as 70 per cent of its targets. Even after the group's disappointing performance, the terms of the remuneration scheme still awarded Sir Peter 86 per cent of the maximum share package.

Sainsbury's is believed to have been advised by its lawyers that if it was to challenge Sir Peter's pay-off in the courts, it would almost certainly lose. An independent mediator has now been appointed to resolve the dispute.

Shares in Sainsbury rose 3 per cent last week as speculation mounted that the group is being eyed by potential bidders, including the billionaire Reuben brothers. However, the Sainsbury family, which owns more than one-third of the company's shares, has reportedly given its support to Mr King until at least the end of 2005.

Meanwhile, the retailer WH Smith has won support from the National Association of Pension Funds for an unusual incentive scheme that promises venture-capital style rewards for its top management team.

The NAPF advised its members to back the scheme, which could net WH Smith's chief executive, Kate Swann, £3.9m, ahead of an extraordinary meeting this month.

The shareholder group, which was not consulted when the retailer drew up the plan, said: "While there is a high potential reward to participants, it would require significant and exceptional performance for even threshold targets to be achieved."

Under the scheme, the company's 40 top employees can invest up to 100 per cent of their gross salary in shares in return for a potential payback of up to five times their initial investment if the retailer hits its earnings targets over the next three years.

WH Smith shares, currently trading at 307.5p, must hit 557p for executives to qualify for the maximum payout.

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