After surprising even itself with the recovery in its fortunes over the past 12 months, Marks & Spencer is more than doubling the potential bonus open to its top executives. If Stuart Rose, the chief executive, beats his targets again this year he could be in line for a pay package of more than £7m, the retailer's annual report revealed yesterday.
The group has lowered the performance targets needed to trigger its long-term incentive scheme while doubling the maximum reward. It wants to increase the potential value of shares awarded under its performance share plan to 400 per cent of base salary - worth £3.8m for Mr Rose.
The share scheme for its top 100 managers depends on how fast the group grows its earnings per share - a controversial measure of testing performance because companies can manipulate their EPS simply by buying back shares. Its EPS needs to grow between 5 and 12 per cent faster than inflation to pay out next year, down from the 8 to 15 per cent increase needed to trigger last year's windfalls.
In addition, Mr Rose and his executive colleagues Ian Dyson, the finance director, and Steve Sharp, the marketing director, will see their potential bonus increase to 250 per cent of their base salary next year, up from 150 per cent this year. The changes are worth up to £7.125m to Mr Rose, including his new basic salary.
A spokeswoman said the changes were needed to ensure the top team stayed put. "We don't want to start losing people because we still have a lot of work to do."
Last year, M&S reported a 35 per cent rise in pre-tax profits to £751.4m, which beat City expectations. Its sales were £7.8bn, up from £7.5bn, and its EPS were 31.4p up from 19.2p.
Its shares have almost doubled since Mr Rose took over, briefly hitting 620p before easing back to close down 8p yesterday at 538.5p. When Mr Rose joined in May 2004, which was two days into Philip Green's putative attempt to buy the retailer, the shares were trading at 360p.
The annual report shows that Mr Rose's salary package was worth £2.3m last year, up from £2.2m the previous year, which included his signing-on fee. He was paid a maximum £1.425m bonus, half of which was in deferred shares, for beating targets. His basic salary increased to £950,000 from £875,000 on 1 January.
Both Mr Dyson and Mr Sharp also received maximum bonuses at 150 per cent of their base salaries, which rose to £475,000 from £420,000 on 1 January.
The company's boardroom wage bill fell to £4.87m from £9.67m because it only included a relatively modest £622,000 in termination payments, made to Alison Reed, the former finance director. In previous years it has had to make bumper payouts to get rid of directors from Luc Vandevelde, its former chairman, to Roger Holmes, who was Mr Rose's predecessor.
M&S said it planned to send 400,000 shareholders, including nominees, vouchers to spend on full-price merchandise. It also urged shareholders to "make their views known" to the company.
Share jump aids African school
A school in the heart of dusty Tanzania has received a £519,000 bonus due to the astonishing surge in Marks & Spencer's share price.
That is the amount Stuart Rose, the retailer's chief executive, has given to the Friends of Mvumi Secondary School, as disclosed in the group's annual report. For the secondary school, which already has a new administration block courtesy of Mr Rose, benefits from the fact that M&S's shares soared beyond the symbolic level of 400p last October.
Mr Rose pledged to give any profit he made on 979,825 share options he received when he joined in May 2004 between the options' strike price of 347p and the 400p-per-share bid approach from rival retail entrepreneur Philip Green that he turned down.
Mr Rose last visited the school, in the country where he spent much of his childhood, in 2003, but plans to go again this summer.Reuse content