The discount clothing retailer Matalan has risked sparking a shareholder rebellion by promising to pay its departing chief executive 12 months' salary for helping it find his successor.
The group surprised the City yesterday with news that John King planned to quit the company after less than three years in the role. He is Matalan's third boss in the past five years.
Shares in the retailer rallied 1.25p to 171.25p on speculation that the latest changeover at the top signalled that Matalan's founder and chairman, John Hargreaves, would be open to a bid.
The board has asked Mr King to stay on until December while it searches for his replacement. It said that "in recognition of this" it had agreed to pay him an additional 12 months' remuneration - at least £420,000 - at the end this year.
Shareholders criticised the decision, which they said smacked of the furore over United Business Media's decision to pay its departing chief executive, Lord Hollick, a £250,000 "special bonus" for finding a successor. An investor revolt forced Lord Hollick to hand back the cash. One top shareholder in Matalan said: "We were not pleased to hear about this. We will take the matter up with the non-executives because it goes against the combined code."
A spokesman for the National Association of Pension Funds said investors would be "bound to ask questions about why someone should get paid extra for doing something that should be part of their job".
Mr King has long failed to deflect rumours of tensions with Mr Hargreaves. Mark Charnock, at Investec Securities, said the fact that Mr King was to receive a year's remuneration on leaving supported the view that the pair had clashed. "Why else would you give somebody an extra year's pay?" he said.
Under Mr King's leadership, Matalan had sought to dispel its reputation for having a revolving boardroom door. It attempted to incentivise its top team into staying with the promise of multimillion-pound payouts if the group was taken over before the end of 2007. This followed the abrupt departure of Mr King's predecessor, Paul Mason, in 2003 after just 12 months in the job following a row with Mr Hargreaves. Mr King said he wanted to return to the US, where he spent two years prior to joining Matalan running the lingerie manufacturer Delta Galil. He is about to marry his American girlfriend.
Analysts said Mr King's decision to leave did not augur well for the group's prospects. The chain is being squeezed by supermarkets' clothing lines. Mr Hargreaves has long been rumoured to be open to a bid, but is thought to want at least 300p a share. Tesco and Asda are tipped as possible bidders.Reuse content