Safeway, the supermarket group at the centre of a five-way takeover battle, became the latest company to court a "fat-cat" pay storm yesterday when it revealed that its chairman, David Webster, has built up a £7.6m pension pot. The company's annual report, published yesterday, also shows that two of the board have controversial two-year contracts.
Mr Webster, who helped lead the buyout of Safeway in 1977, saw his pension pot rise by £1.37m in the year from £6.2m to £7.6m. This will entitle him to an annual pension of £452,000. Mr Webster, 58, also received a pay rise in the year, taking his total pay last year to £810,000, compared with £759,000 in 2002. In addition he has a contract which extends until February 2005, longer than the 12-month contracts that are regarded as best practice. A clause in his contract entitles him to one-and-a-half years' pay, worth £1.2m, if he loses his job.
Two other directors have two-year contracts. They are Simon Laffin, the finance director and Richard Williams, the group services director. They could be in line for pay-offs of about £800,000. Carlos-Criado Perez, the group's Argentinian chief executive, has a 12-month contract and received total pay and bonuses of £802,000. In the event of a takeover he is entitled to two year's basic pay, worth £1.3m.
The National Association of Pension Funds, which recommends director contracts to be no longer than one year, said: "We have not done our report yet but last year we did recommend an abstention on a director [Simon Laffin] who was up for re-election and was on a two-year rolling contract. It is likely that we would be unable to support contracts of this length."
Large pension payments to directors have drawn heavy criticism from corporate governance groups and unions this year because they see it as a way for boards to award directors fat sums in deferred pay. Kingfisher was forced to justify at its annual meeting last week the £15.2m pension pot accumulated by Sir Geoff Mulcahy, ousted from the retailer at the end of last year.
Other big winners on the pension front are Niall FitzGerald, the co-chairman of Unilever, whose retirement pot is worth £11.7m, and David Jones, the former head of Next, who has accumulated £10.2m.
Commenting on the length of some directors' contracts Safeway said: "Given the current uncertainty over our future the board decided it wasn't appropriate to change the contract periods."
On the subject of Mr Webster's pension, Safeway said: "It's so big because he's been around for so long." As well as working for the company for 26 years, Mr Webster has regularly drawn a salary of more than £700,000.
Safeway said his pension pot, the amount in his pension fund required to pay the annual pension required under the terms of his final-salary entitlement, had been increased due partly to a guidance from actuaries. This guidance said that, due to a fall in the gilts market, transfer values would need to be "materially" increased for people close to retirement. This is because pension fund assets are switched out of equities and into bonds and gilts as members near retirement.
Mr Christensen, 59, has also accumulated a large pension pot. It increased to £3.6m from £2.7m in the past year, entitling him to an annual pension of £187,000. Mr Christensen has been with Safeway since 1974.
Safeway's may face some criticism of these payments at its annual meeting on 8 July. But if it succumbs to one of the five bids, the pay-offs for loss of office will be met by the bidder, not Safeway shareholders.
The bids from Tesco, Wal-Mart, J Sainsbury and William Morrison are currently being reviewed by the Competition Commission. The indicative bid from retail entrepreneur Philip Green was cleared but he has yet to make a formal offer.Reuse content