Santander offers 125% bonuses to hold on to A&L executives

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Alliance & Leicester's four executive directors are in line for payments of up to 125 per cent of their salaries if they stay in their jobs for just over a year after the bank is bought by Banco Santander of Spain.

Santander will pay David Bennett, A&L's chief executive, and three other directors retention bonuses of 75-125 per cent if they remain with the company until 30 November 2009, A&L said.

Mr Bennett, the top-earning executive, earns a basic salary of £600,000, while Chris Rhodes, the finance director, gets £450,000.

If any of the executive directors is made redundant or leaves due to illness before the trigger date, they will be paid the bonus pro rata from 1 August. The payment would be in addition to a year's salary and pension contribution plus a potential bonus if the contracts of Mr Bennett, Mr Rhodes and Richard Banks, director of risk, are terminated.

Ian Buchanan, who joined the board as manufacturing director just before Santander made its bid, has different terms.

The retention plan has been put in place by Santander to ensure stability at A&L "until such time as Banco Santander's strategy for A&L is fully evolved", A&L said in a document to shareholders outlining the deal.

Analysts expect Santander to part company with A&L's executive directors as it merges the former building society with Abbey, its existing UK business. Santander has boasted that it can cut up to £50m of costs from A&L on its own.

The Spanish bank will also give all A&L employees 100 free Santander shares, worth a total of about €9.1m (£7.2m), a move it also made to build loyalty when it bought Abbey in 2004.

In a letter to the bank's shareholders, including more than 560,000 small investors, Roy Brown, the acting chairman, recommended that all investors should vote for the deal ahead of a special shareholder meeting scheduled for 16 September. He said A&L's board decided to sell because turbulent financial conditions threatened the bank's future.

The acquisition, valued at about £1.3bn, requires 75 per cent shareholder approval.