Marks & Spencer and the corporate transfer
How appropriate that the terms of Marc Bolland’s recruitment to Marks & Spencer (LON:MKS) were announced on the last day of the football transfer window. M&S is paying a £7.5m fee to attract him from rival retailer Wm Morrison (LON:MRW).
Companies do not usually buy executives from other corporations in the way that football clubs buy and sell players. But that effectively is what Marks & Spencer is doing in giving Bolland £2.6m of cash and shares now to compensate him for benefits he would have received at his old employer, plus another £4.9m later.
It is Bolland not Morrison that gets that £7.5m of course, but by saving his old company from making the payment, Morrison is that much better off, just as if it had sold its former chief executive directly to Marks.
Bolland’s whole package is worth £15m based on a basic salary of almost £1m and the scope for bonuses of £6.3m. But while the latter bonuses are performance-related, the transfer fee is Bolland’s whether or not he succeeds. It sets a new standard for golden hellos in the boardroom – though the suspicion is that City dealers below director level – and thus below disclosure level – might have set the precedent.
Just before the transfer window closed the former chief executive of the Football Association, Adam Crozier, was poached from Royal Mail to head ITV on a package of similar value. He is on nearly £800,000 a year basic pay but will get his bonuses only if he performs.
The £43m demanded by former BSkyB boss Tony Ball to join ITV, later reduced to £20m, was clearly too much for the broadcaster, but by agreeing a package of up to £15m for Crozier, a new rate for a chief executive’s job seems to have been set.
Morrison had a good card up its sleeve is selling Bolland however. He is on a one-year contract with the supermarket group so, having resigned last November, the company could have kept him on gardening leave until next November. Letting its boss join a rival when it did not have a replacement was not in Morrison’s interest, so while it may look mean or even spiteful, his former company had no reason to let him go early.
The compromise – now that Morrison has found a new chief executive - is that Bolland will be allowed to join Marks in May. The transfer has elevated executive negotiation to new levels though.
