Failure's reward: ousted chief wins a £15m pension

Tumbling share price, but ex-Kingfisher boss nets second largest pot in UK business history

The debate over executive payments to some of Britain's leading businessmen grew more heated yesterday when it emerged that the former chief executive of one of the country's biggest retailers built up a pension "pot" of more than £15m.

Sir Geoff Mulcahy, who was ousted from the Kingfisher retailer group at the end of last year, will be paid an annual pension of £790,000 as a result. That is 107 per cent of his salary when the pension was agreed, far in excess of even the most generous final salary schemes that, typically, aim to pay out two-thirds of the member's final salary.

The figures, included in Kingfisher's latest annual report, will add to the "fat-cat" payments controversy because Kingfisher's shares fell from a high of 719p in 1999 to 200p by the time Sir Geoff left. His supporters claim, however, that the shares performed strongly over the length of his tenure. Sir Geoff also received total pay last year of £1.4m, including a £502,000 pay-off.

Sir Geoff's £15.2m fund, which was up by £2m on the previous year, is the second largest pension pot recorded in UK business, behind only Sir Richard Sykes, the former chairman of the drugs group GlaxoSmithKline.

The figures were disclosed as research by Incomes Data Services (IDS) showed the average pay package of directors at Britain's top companies rose by 25 per cent last year even though share prices slumped.

The study drew angry responses from unions who have seen minimal pay rises awarded to rank-and-file workers. Derek Simpson, joint general secretary of Amicus, labelled the increases "obscene". He added: "It rarely relates to performance and too often executives have huge pay-offs from companies they have mismanaged, whereas workers have paid the real price and are given below-inflationary rises."

Sir Geoff, who is 60, led Kingfisher for 20 years, buying out the Woolworths chain in 1982 before adding Comet, Superdrug and B&Q to the empire. He left at the end of last year as the company sought to accelerate the restructuring of the group into a DIY specialist.

Kingfisher's annual report also showed that its new chief executive, Gerry Murphy, who joined from television group Carlton Communications, will be paid an annual salary of £800,000 and be eligible for annual bonuses up to £1.6m if certain performance criteria are met. He has also been granted share options worth four times his annual pay, though these are only worth anything if the share price rises.

In his first year with the company, he stands to collect an additional £360,000 of shares which could turn into £1.4m if Kingfisher performs well in terms of share price growth and dividends paid. Mr Murphy, 47, is eligible for similar payments in each of the next two years as long as he invests up to £250,000 of his own money. Kingfisher said the new bonus scheme replaced its old share option scheme.

Other payments made to Kingfisher executives include a £334,607 relocation allowance paid to the finance director, Helen Weir. She had to move from Southampton when her job at B&Q was switched to Kingfisher's head office in London.

Jean-Hugues Loyez, the former head of the Castorama DIY business in France, was paid £778,000 under his contract after Kingfisher bought out the company. He had already made £28m from the sale.

It is unclear whether Kingfisher will face a backlash from the City over the payments ­ it had already canvassed major shareholders for their opinion.

Kingfisher's chairman, Francis Mackay, said: "To make our executives think and behave like investors, we are proposing to adopt a bonus scheme that makes them long-term shareholders. An overwhelming majority of those shareholders consulted directly have expressed their support for it."

One point that may help Kingfisher is its shares have performed strongly since Mr Murphy's appointment, outperforming the stock market and the retail sector.

Kingfisher's payments are part of a trend, according to the research from IDS. Bart Becht, chief executive of cleaning giant Reckitt Benckiser, topped the scales, IDS said, pocketing cash and shares worth a total of £5.1m.

Fred Goodwin, chief executive of Royal Bank of Scotland, was awarded £2.6m. He was overshadowed by Larry Fish, head of Royal Bank's American operations, who received £3.9m in 2002.

Centrica, the gas company, proved itself to be one of the most generous employers, paying £2.8m to its chief executive, Sir Roy Gardner.

In terms of basic salary Matt Barrett, the chief executive of Barclays bank, topped the league table of Britain's largest companies, taking home £1.1m before bonuses and other extras.

Tom Glocer, chief executive of Reuters, also ranked highly, collecting basic pay of £816,000 despite overseeing hard times for the media and information group as it plunged last year to its first loss and is now in the process of laying off 5,500 people.

CASH IN HAND

Sir Geoff Mulcahy's £15m pension pot was built up over 20 years at Kingfisher. As a high earner who was regularly paid more than £1m a year, the payments into his fund would have been larger than those of most executives. The sizes of pension pots are being disclosed under new rules. Other big winners are Niall FitzGerald, a co-chairman of Unilever (£11.7m), and David Jones, the former head of Next (£10.2m).