Safeway set for row with shareholders over pay-offs

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The Independent Online

Safeway, the supermarket chain at the centre of a five-way bid battle, faces a row with shareholders today over controversial two-year contracts which would see its directors walk away with more than £4m if one of its bidders succeeds.

Pirc, the shareholder lobbyists, has recommended investors vote against Safeway's report on directors' pay at its annual general meeting in London.

Under the terms of Safeway's contracts, its chief executive, Carlos Criado-Perez, would receive a £1.3m windfall if the supermarket changed hands thanks to a provision which entitles him to 24 months' basic salary in the event of a takeover.

David Webster, chairman of the retailer, would be entitled to £1.16m, equal to one and a half times his basic salary. Simon Laffin, Safeway's finance director, and Richard Williams, services director, have two-year rolling contracts. Such contracts are increasingly frowned on by institutional investors because they award so-called "golden goodbyes" to directors even in cases where they are ousted due to failure.

However, the powerful National Association of Pension Funds said that due to the exceptional circumstances Safeway is in, it has not advised shareholders to block its remuneration report.

The NAPF said it was taking a "sympathetic view" of Safeway's argument that it is not able to renegotiate its contracts at the moment.

Shareholders are also likely to question Safeway's board about the future of the company. Rivals J Sainsbury, Tesco, Wal-Mart and WM Morrison are stalking it, along with Philip Green, the retailing billionaire. All but Mr Green's bid have been referred to the Competition Commission, which is due to complete its investigation into the different offers next month.

Separately, a new remuneration scheme at the money broker Icap has come under fire from the corporate governance lobby. NAPF said the new profit-share fund, which could give its chief executive, Michael Spencer, and his three fellow executive directors a pot of at least £4.2m between them this year if profits exceed £140m, was too generous. Half the bonus pool would be paid out in shares immediately, with a matching award of shares after three years if the director is still working for the company.

NAPF objects to the fact the deferred shares are paid out regardless of the performance of the company over the intervening three years. It has recommended shareholders oppose its introduction at its agm next Wednesday.

Burberry, whose agm is next Tuesday, is also on the NAPF hit list. The body objects to the generous terms of the contract of its chief executive, Rose Marie Bravo, who pocketed £19m in pay and shares last year. Her contract entitles her to a pay-off worth more than 12 months' money, plus relocation back to the US, if the fashion house is taken over.

Man Group has also been challenged by Pirc to justify at its agm tomorrow bonuses equal to 700 per cent of basic pay for some of its directors.