M&S to pay Vandevelde £520,000 a year in shares for a three-day week

Marks & Spencer unveiled a trailblazing pay package for its chairman, Luc Vandevelde, yesterday, paying him in shares rather than cash in an attempt to avoid criticism for payments for failure.

Mr Vandevelde, who went part-time in January, will be paid 13,500 M&S shares each month for a modest working regime of up to three days a week. That equates to £520,000 a year at the present share price, making him one of the highest-paid chairmen in the FTSE100 index. But if the share price falls, Mr Vandevelde will suffer a pay cut.

Many major companies have been caught up in "fat cat" pay rows, with top executives enjoying big rises in pay and pension benefits at a time of falling stock markets.

M&S said its deal for the 52-year-old Mr Vandevelde was in the best interests of shareholders after two years when his big bonuses have been criticised. "We believe it is right for him and it will be of benefit to all shareholders," a spokes-woman said. "He was the architect of our turnaround."

M&S will continue to pay for Mr Vandevelde's hotel when he is in London. But under the terms of his deal he will not be eligible for bonus payments or pension contributions.

Mr Vandevelde, who earned £1.7m last year, will be hoping to avoid the painful precedent provided by Peter Giller, the former chief executive of the electricity giant, International Power. He struck a deal in 2000 to be paid entirely in shares. But the share price collapsed meaning a pay packet that was originally worth £677,000 a year, ended up being worth just £190,000. The deal left him among the worst-paid chief executives of a major company, and Mr Giller joked that he and his wife got by on half-price chicken bought at supermarkets just before they closed. Last year he was moved to deputy chairman, then left the company.

A more positive example might be Allan Leighton, the Royal Mail chairman. He was appointed chairman of the internet travel company lastminute.com in October 2000. He struck a deal that gave him no basic salary but a million share options instead. These were priced at 137.5p but rapidly became worthless after the stock sank to 18.75p as the dot.com bubble burst. Now, after a rapid recovery which has seen the shares soar to 186.25p, his options are worth £500,000.

Mr Vandevelde, a Belgian, has overseen a dramatic turnaround in M&S's fortunes since he joined in 2000. He brought in Roger Holmes as chief executive and helped stabilise the high street giant.