WH Smith will pay its new chairman, Robert Walker, an annual salary of £200,000 for working one day a week, when he succeeds Richard Handover next February.
The appointment ends a frustrating nine-month search for the struggling retailer, which sunk to a £135m loss last year.
It comes at an embarrassing time for Mr Walker, the chief executive of Severn Trent, the water utility that was recently plunged into an accounting inquiry. He will join WH Smith on 1 January and leave Severn Trent one month later.
Mr Walker, 59, said he was "excited at the opportunities and challenges that lie ahead". He will work one day a week for WH Smith as non-executive chairman.
Shareholders broadly welcomed the choice - although it comes after several other candidates are thought to have turned the job down. One investor said: "It's a difficult job because the company operates in a very competitive market. It's not easy but he can do it."
But retail analysts were non-plussed, with most commenting that Mr Walker did not seem an obvious choice. One added: "I can't believe the news flow at Severn Trent can be helping."
Mr Handover, who is the chairman and receives £465,000 a year basic salary, will step down from the board on 31 January after almost 40 years at the retailer. He became chairman in November 2003 and had hoped his tenure would be longer, but investors pressed for an early departure. Mr Handover has amassed a pension pot of almost £5m, which according to the company's annual report, will give an annual pension of £281,000.
Before Mr Walker joins, WH Smith must endure one of the most testing trading periods in its history. After last year's dire Christmas, which ended in a new year profits warning, the group is under intense pressure to perform. Analysts are sceptical that this year will be much better, given the intense rivalry on the high street.
Kate Swann, the chief executive, has avoided last year's confusing cross-category promotions and is sticking to four offers on each of the group's four product areas. Its offer includes "buy one get one half price" on 200 hardback books and "three for two" on all cards and gift wrap.
Ms Swann said Mr Walker's "extensive experience in consumer markets" would "serve the company and its shareholders well". Before joining Severn Trent in 1996, Mr Walker spent 22 years at PepsiCo. He began his career in marketing at Procter & Gamble, later spending six years at McKinsey, the consultants. He sits on the boards of Wolseley, the building materials group, and Signet, the jeweller.