The move, which may attract the ire of its investors, mean that the most senior directors, such as new chief executive Richard Handover, could receive payments of up to pounds 800,000. Mr Handover is on a two-year contract of around pounds 400,000 a year. Other, more recently appointed, directors such as WH Smith Retail managing director Beverley Hodson, have contracts of just one year. John Hancock, the head of the US business, is also on a two-year contact and would qualify for more than pounds 300,000.
The company justified the payments saying it was "simply bringing Smith's into line with current practice." A spokesman cited other companies such as Cadbury Schweppes, Kingfisher, Barclays Bank and Pearson, saying they all have similar arrangements.
The changes were made last year and reported in WH Smith's accounts published in July. This was just two months before Tim Waterstone made his audacious pounds 1bn approach to the company which would have seen him installed as chairman.
A WH Smith spokesman said the payments for loss of office were an additional incentive for the directors to not to abandon the company during a takeover situation. The company declined to comment on whether large pay packages, bonus payments and share option schemes did not already provide sufficient incentive.