A detailed comparison of Bolland’s ongoing annual package at Morrisons versus that of his proposed M&S package and the package of his M&S predecessor, Stuart Rose, demonstrates that no ‘quantum leap’ has been proposed in terms of the ongoing annual package. The one contentious aspect is the ‘exceptional’ LTIP award being in addition to the compensation package for his incentive awards at Morrisons.

	Component	Morrisons – Bolland	Marks & Spencer – Bolland	Marks & Spencer – Rose
Fixed	Salary	2009-10 salary: £850,000	£975,000  (+£125,000)	2009: £1,130,000
	Benefits in Kind	Transport costs, health insurance, telephone expenses and the use of a Company leased apartment.	Not yet disclosed	Life assurance cover and a car or car cash allowance plus driver
	Pensions	Salary Supplement: 30% of salary	Not yet disclosed	Cash in lieu: 25% of salary
Variable	Annual Bonus	Maximum: 100% of salary. 2008-09 actual was 75.6% of salary.	Maximum: 250% of salary.	Target: 60% of salary. Maximum: 250% of salary. Mandatory Deferral: 60% of annual bonus into shares for three years
	Performance Shares	Limit: 300% of salary (face value). Policy: 250% of salary (face value)	Limit: 400% of salary in ‘exceptional circumstances’, otherwise 200% of salary. 2010 award: 400% of salary	Limit: 400% of salary in ‘exceptional circumstances’, otherwise 200% of salary. 2009 award: 200% of salary (after a climbdown caused by investor anger over a 300% of salary award, being the third successive year of an exceptional award).

Secondly, an examination of the compensation package reveals why the Remuneration Committee may have felt the need to ‘buy-out’ his existing package at Morrisons. Bolland’s departure from Morrisons hit the Morrisons share price (15 pence off on the day) , but had he stayed he was due for some bumper paydays at the company given the outperformance of the company during his tenure.

Taking a look at his existing share awards, and comparing this to the ‘buy-out’ figures, reveals that M&S paid close to the total market value of his awards, which based on recent strong performance at Morrisons would, for the first two awards at least, have been very likely to vest in full.

Vesting Date	2010	2011	2012	Total
Shares	294,256	557,445	858,065
Performance Condition	EPS & Sales Growth	EPS & Sales Growth	EPS & Sales Growth
Value as at closing price on day before departure announced (17 Nov 2009)	£869,526	£ 1,647,250	£2,535,582	£5,052,358
M&S “buy-out” amount	£1,000,000	£3,900,000		£4,900,000

This suggests that although the numbers are indeed large, with proper explanation the total package may not have been contentious. The remuneration committee and the M&S press department could have pre-empted the media coverage by supplying sufficient detail in relation to Bolland’s remuneration package.

2. Individual limit under Performance Share Plan?

The regualtory news announcement indicates that there will be two awards under the Performance Share Plan for 2010-11 – the ‘exceptional’ annual award of 400% of salary plus the ‘compensation award’ of £3.9m (being another 400% of salary) – i.e. an aggregate award of 800% of salary. However the plan only allows a maximum of 400% of salary in any one year in exceptional circumstances. So will this require shareholders to approve an amendment to the rules of the Performance Share Plan at the 2010 AGM?

M&S has now confirmed that they will go down the route of a special “one-off” plan to allow for the ‘compensation’ awards, taking advantage of an exemption to the Listing Rules. Under Listing Rule 9.4.2(2), shareholder approval is not required where an arrangement is ‘established specifically to facilitate, in unusual circumstances, the recruitment or retention of the relevant individual’.

3. Second best better?

Recalling the storm over the ITV/Tony Ball attempted appointment, some investors criticised the company for its failure to recruit the perceived “best candidate”, although others welcomed the steely approach of the ITV remuneration commiitee in not allowing shareholders to be taken to ransom (although the “ransom” demand at ITV may have been higher than the compensation package for Bolland).

Yes, on the face of it, the package seems rather rich, but would Bolland have joined Marks & Spencer without being compensated for missing out on these awards? Probably not. The alternative would have been to settle for the (unknown) second best candidate. Would this really have been in the best interests of shareholders?

Disclosure Lessons …

But what shareholders might want to ask when the dust has settled is why the press department has let the remuneration committee down so badly. Perhaps a leaf out of other retailer’s slogan hand book might help:

“M&S – Good with disclosures”
“M&S – Every little helps … the Remuneration Committee”
“M&S – More reasons to …. get some PR help”
“M&S – Rolling back … the disclosures”
“M&S – Try something new today (in the PR department)”

Links

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Daily Telegraph >>

Daily Mail >>

Last Updated: 2 February 2010