Marks & Spencer's new chief executive will pocket nearly £15m in his first year, it emerged yesterday as the high-street retailer ended months of speculation by confirming that Marc Bolland would start on 1 May.
The signing-on fee for Mr Bolland, the former chief executive Morrisons supermarkets, is the biggest ever awarded to the boss of a UK-listed retailer, although £7.5m – more than half – is compensation for the loss of shares and bonus he would have received at Morrison's.
The Dutchman will start on a basic salary of £975,000 and a potential annual bonus up to 250 per cent of his wages. But he will also be entitled to an exceptional award of shares under the M&S performance share plan, which will be worth 400 per cent of salary in 2010-11.
His total package for M&S's next financial year will be up to £14.8m, but the award under the share plan will not come into effect until 2013.
Tony Shiret, an analyst at Credit Suisse, said last night: "This is really huge. I think you would have to go to the US to find comparable level of pay. It highlights the magnitude of the task that is facing him."
Coming so soon after the row about bankers' bonuses, Mr Bolland's bumper remuneration package is certain to re-ignite the debate about excessive corporate pay. His earnings will comfortably outstrip those of the chief executives at M&S's bigger rivals Tesco and Sainsbury's this year.
Mr Bolland will take over as chief executive from Sir Stuart Rose, the M&S chairman, ending months of legal tussles between him and his former employer about compensation.
M&S first said it had signed Mr Bolland, who was on a year's notice, in November. Yesterday, Morrisons said he had ceased to be a director of the grocer with "immediate effect". Mr Bolland has turned Morrisons around since he took over the company in September 2006. The grocer's underlying sales rose by 6.5 per cent over Christmas – more than its main rivals Sainsbury's, Tesco and Asda.
Market sources suggested that Mr Bolland had known of his start date at M&S for weeks but had been locked in negotiations with Morrisons and M&S to finalise his settlement. Sir Stuart will step down as M&S chairman before 31 July next year at the latest.
Details of Mr Bolland's terms come at a difficult time for M&S, whose Christmas sales lagged behind those of its biggest high-street rivals. In particular, its upmarket food business – which accounts for about half of its total sales – has taken a pounding from Waitrose since March.
Although the high-street bellwether's food sales have improved slightly, they still lag behind those of the big supermarkets.
M&S's general merchandise division, primarily clothing, performed better at Christmas but its total UK like-for-like sales, which include stock sold online, increased by only 0.8 per cent. Mr Shiret said: "[Mr Bolland] needs to reposition the whole business."
Mr Bolland's compensation from Morrisons will see M&S pay him £1.6m in cash and £1m of shares that would have vested in 2010. M&S will also pay him a restricted share award worth £1m and a performance share plan worth £3.9m to compensate for Morrisons shares that would have vested in 2011 and 2012.
Last week, Morrisons named Dalton Philips, the Irishman who is chief operating officer at the Canadian grocery giant Loblaw, as its new chief executive. He will start next month.
Marc Bolland: Hits the jackpot at M&S to outstrip major supermarket chiefs
Morrisons is the UK's fourth-biggest grocer but, in terms of pay, the grocer's former chief executive Marc Bolland will put his supermarket rivals in the shade when he joins Marks & Spencer in May.
At M&S, Mr Bolland will comfortably earn more than the bosses of Tesco, Sainsbury's and Asda over the next year. Mr Bolland will bag £14.8m in his first year at the high street retailer, although the sum is skewed by the £7.5m M&S is paying to compensate him for loss of bonus and shares at Morrisons.
Sir Terry Leahy, the chief executive of Tesco, saw his total package fall to £5.1m for the 53 weeks to 28 February 2009, down from £5.47m the previous year, after Tesco failed to meet performance targets at its Fresh & Easy grocery operation in the US. He took home a salary of £1.36m and performance-related bonuses of £3.66m. He could also pocket £11.5m over the next four years from long-term share bonuses, awarded in 2007. Tesco delivered eye-watering group pretax profits of more than £3bn in 2008/09, but, in contrast, profits at M&S tumbled 40 per cent to £604m in its last financial year, ending in March 2009.
Sir Stuart Rose, the M&S chairman did not receive a bonus for the second year running, but he still pocketed a package of £1.77m in 2008/09.
Justin King, the chief executive of Sainsbury's, received a £5.4m package last year after his turnaround plan delivered a share package of £3.3m. Mr King – a former M&S director who was seen as a contender for the chief executive role – received a basic salary of £872,000 and a bonus of £869,000.Reuse content