Morrisons plays the loyalty card

By This Is Money
Updated: 03:32 EDT, 2 June 2011

The last thing supermarket group Wm Morrison needs is to lose another leading man.

Its former star chief executive Marc Bolland defected last year to Marks & Spencer, which had lured him with a £15m welcome package, so it is understandable the grocer is prepared to pay handsomely to hang on to its talented finance supremo, Richard Pennycook.

Before Bolland's exit, the group had acceded to shareholder pressure to rein in top pay and may well feel it cannot afford to risk another departure, particularly at a time when it is contemplating a bid for frozen foods group Iceland and so needs plenty of firepower in the boardroom.

But the terms of Pennycook's 'retention' payment look very generous indeed.

They grant him shares equivalent to around 230% of his basic salary after two years, provided earnings per share rise in line with retail price inflation.

Two years is not a particularly long time and surely Morrisons ought to be aiming to create value above and beyond the RPI, even in the current climate when household spending is squeezed.

It is unfortunate timing for Morrisons in that this information has emerged in a week when its rival Tesco has restructured its executive rewards in response to investors' concerns which centre on the payments to Tim Mason, who runs its struggling US division.

It is also unfortunate that news of Pennycook's loyalty bonus comes so soon after a report by consultants Manifest and MM&K, showing that while the FTSE 100 rose just 9% last year, the earnings of chief executives rose by 32%.

Morrisons deserves the slaps on the wrist it has been administered by corporate governance lobbyist Pirc and shareholder body the ABI.

The onus is now on Pennycook to show he can deliver value for money. After all, that is what running a supermarket is all about.

What's in a name

It would be unfair to call him a shameless Hussey. But when an executive takes a post with a predator who has been eyeing his former employer, it is bound to set City tongues wagging.

James Hussey was until last summer the chief executive of the UK's leading bank note printer, De La Rue, where he was a 25-year veteran.

So it was a remarkable switching of sides for him to join French rival Oberthur, which has been stalking De La Rue, as an adviser to its chairman.

Oberthur made a big point of saying this did not mean it had any intention of launching another bid. Really?

The fact it said anything at all on the subject was interesting, since Oberthur was prevented under City rules from embarking on a fresh assault until July anyway, having walked away from an earlier effort in January.

So why would the French firm risk setting a new clock ticking under the takeover timetable, debarring themselves from bidding for even longer, until the end of the year?

Well, it may be that their appointment of the well-respected Hussey - who fell on his sword over problems with an order of Indian bank notes - was purely made on his merits, with no ulterior motive.

Or it may be a cunning plan. As keen-eyed observers have pointed out, there are no other obvious suitors on the horizon so ruling out a bid until Christmas might keep a lid on De La Rue's share price, allowing Oberthur time to sell off its card services business and build up a war chest of cash.

Hussey's store of knowledge on De La Rue would certainly be invaluable to a bidder - he is the walking, talking equivalent of due diligence.

It sounds all too plausible. But it would be a shame if De La Rue, founded in 1821 by Channel Islands entrepreneur Thomas De La Rue, is forced to succumb.

Go east

The London Stock Exchange cannot take its historic pre-eminence for granted. Coca-Cola is the latest in a line of big firms to eye a listing in Asia, along with the likes of luggage maker Samsonite, designer clothes company Prada and French fragrant soaps brand L'Occitane.

The risk for the LSE - which last night published the prospectus for its proposed merger with Canada's TMX - is that it responds to the competition by being over-accommodating to companies wishing to honour the FTSE with their presence, such as Glencore.

Far from being a feather in the City's cap, Glencore has this week created more corporate governance worries because of loans it had received from the European Investment Bank, which have now been frozen.

A London listing still has a certain lustre. We need to keep it that way.