Trouble-hit M&S pays off top directors

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The Independent Online

Marks & Spencer ran into a fresh row over "fat cat" boardroom pay-offs yesterday after Peter Salsbury resigned as the group's chief executive following a further slump in clothing sales, which the City regarded as a profit warning.

Marks & Spencer ran into a fresh row over "fat cat" boardroom pay-offs yesterday after Peter Salsbury resigned as the group's chief executive following a further slump in clothing sales, which the City regarded as a profit warning.

Mr Salsbury, who presided over a collapse in profits and a dramatic slump in the company's share price during his two years in the post, is leaving the struggling retailer with immediate effect with a pay-off equivalent to a year's salary of £560,000. Two other directors are also leaving with significant compensation packages. Clara Freeman, head of UK stores, departs with a pay-off of £260,000. Guy McCracken, head of international retail, business systems and IT, departs with £390,000.

The pay-offs were attacked as "obscene" by the GMB union. John Edmonds, the union's general secretary, said: "It is bad enough that these directors are being rewarded for failure, but their failure has been built on the lost jobs and livelihoods of thousands of workers.

M&S has cut more than 700 jobs among its own staff in the past two years while thousands more have been lost in the textile industry as M&S seeks to restructure its supply base.

The union attack came as M&S announced its fifth boardroom shake-up in the past two years and a downbeat trading statement, which showed that UK sales have been reduced by £21m due to last week's fuel dispute. Margins have also been hit by increased marketing costs of £15m and £22m associated with the refurbishment of 22 "new concept" stores.

As a result of Mr Salsbury's departure Luc Vandevelde, who joined M&S as chairman in March, will become chief executive as well as chairman. As expected Roger Holmes, head of the electricals division at Kingfisher, is joining as UK retail managing director on a salary of £425,000. David Norgrove, chairman of M&S's ventures division, is promoted to the board as head of strategy, international and ventures.

Analysts were unimpressed by the changes. One said of the board: "It's all pretty pathetic." Another drew attention to the inexperience of the new M&S top management: "Two years ago the average M&S director had been at the company over 20 years. Now the average is about three months. It increases the risk profile."

Commenting on the departure of Mr Salsbury after 30 years at the company, Mr Vandevelde said: "Peter clearly had the right vision of retailing for M&S going forward. He installed many of the right measures. But he may have underestimated the ability of the business to cope with the amount of change in such as short space of time.

Mr Vandevelde insisted that M&S had not approached Allan Leighton, the former head of Wal-Mart Europe as a potential chief executive. "The search was never for a chief executive. It was for a head of UK retailing."

Analysts downgraded full-year profit forecasts yesterday after the trading update. In the 26 weeks to 16 September UK sales of clothing and home furnishings were down by 2.8 per cent on the previous year in a like-for-like basis. Analysts estimated that UK clothing in the last eight weeks were down by 5 per cent on an underlying basis.

UBS Warburg cut its full year forecast from "£550m to £510m. The shares closed 2p higher at 212.25p.

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