Boots revealed it is to pay its new chief executive, Richard Baker, a "golden hello" of £1.6m yesterday as the 40-year-old retailer laid out plans to return Boots to its core business of health and beauty and undertake a radical makeover of its under-invested stores.
Mr Baker will be paid a base salary of £625,000 with a guaranteed 50 per cent bonus in his first year. He will receive £644,375 to compensate him for the loss of bonuses and share options due under his contract with Asda, where he was chief operating officer. Mr Baker is also eligible for Boots share options worth four times his salary.
He will join Boots on 15 September, the same date as Sir Nigel Rudd will succeed John McGrath as chairman. The current chief executive, Steve Russell, will leave Boots at the end of May after 36 years with the company. Mr Russell, whose strategy of diversifying into services such as Botox injections and aromatherapy has since been jettisoned, will receive a pay-off of £750,000 under the terms of his one-year contract. Mr Russell, 58, is eligible for a pension of £400,000 a year.
Though Boots shares have outperformed the retail sector and the stock market during Mr Russell's tenure, the City lost faith in the strategy with new ventures overseas and in digital businesses racking up huge losses. Mr McGrath had become frustrated with the pace of change.
Fizzing with enthusiasm about his appointment yesterday, Mr Baker said: "It's very exciting. Boots is a fantastic company with high integrity and it has a leading position in markets with natural growth in them." He added that he would return Boots to its roots as a pharmacist and health and cosmetics retailer. "Boots has been focusing around the peripheries instead of concentrating on its core as a dispensing chemist and a retailer of health and beauty products," he said. "There's a lot of value in the core business."
Asked whether its dowdy, old-fashioned stores would receive a makeover, he said: "I think so. They feel under-invested and the fixtures feel like they are from a different age. I'm not going to talk too much about strategy but part of it will be about making the retail business more efficient and customer-centred."
He said some of Boots's services such as optical surgery and dentistry "seemed to work well". But he added that others had "gone a bit too far, too fast".
Mr McGrath said: "What Richard will bring Boots is a bit of both worlds. We are a retailer and a brand owner. We've got someone with nine years' experience at Mars, which is an academy of marketing, plus his experience at Asda."
Reaction to the appointment was mixed. Nick Bubb at Evolution Beeson Gregory said: "It's a trade-off between the hunger, which he's got, and the experience, which he might not."
Mr Baker said he did not envisage any problems working with Sir Nigel despite comments that Sir Nigel might take a very hands-on role as non-executive chairman. "We have a good mix of skills. Nigel has a wide range of experience in industry and a lot of experience with the City. I'm not one for playing politics," he said.
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