WH Smith cash for departing director fuels pay protests

BY NIGEL COPE

Shareholder discontent was rising yesterday against hefty compensation payments awarded to directors who left poorly performing companies.

The issue resurfaced as WH Smith announced that its UK retail director, Peter Troughton, was to leave the company at the end of July with compensation that could exceed pounds 400,000. The departure comes just a month after the company issued its first profit warning in 15 years.

If the final payment, including bonuses and share options, reaches anywhere near pounds 1m it would give further cause for concern to the Greenbury committee, which is examining executive pay.

The WH Smith announcment comes just a day after Dawson International, the Pringle sweater group, announced payments of pounds 2.2m to four former directors, despite losses of pounds 95m in the year to March 1994.

The issue is causing increasing concern in fund management circles. Norwich Union, which owns 3 per cent of Dawson's shares, said yesterday that it hoped the Greenbury committee would recommend shorter contracts, possibly of just one year.

Another fund manager said: "These payments are very annoying but it is a corporate governance issue and there is not much we can do about it. It is a continuing problem with rolling contracts."

WH Smith said it had changed its management structure, which meant that Mr Troughton's job no longer existed. "We decided we no longer needed a UK retail director and in the light of that, Peter decided to leave," the company said. Other management changes are expected but will not be at board level.

Mr Trougton, who is 47, joined WH Smith 16 years ago from the Foreign Office and is well connected with the founding Smith family. He is the son of Sir Charles Troughton, who was chairman of WH Smith from 1977 to 1982.

Mr Troughton was on a two-year rolling contract and a salary of pounds 180,000 a year. He also holds nearly 16,000 shares and has options on a further 120,000. WH Smith declined to comment on whether he would be allowed to cash in his share options.

Smith also denied that the shake-up was a direct result of the profit warning in May, which blamed increased competition and falling foot traffic on the high street for falling sales at its core WH Smith chain.

The City welcomed the changes but questioned whether they went far enough. Sean Eddie, stores analyst at NatWest Securities, said: "This means they are not looking outside for a more punchy manager and that Sir Malcom Field, the chief executive, will be more hands-on."

Another analyst said that Mr Troughton was being used as a scapegoat for group problems. "I suppose someone had to go, though he was quite credible in the City. But fresh blood has to come in."

Under the new structure the heads of the main operating businesses, WH Smith, Waterstones and Our Price music, will report directly to Sir Malcolm Field.

At Dawson International, four former directors shared pounds 2.2m. Peter Kemp, the former chief executive of the group's shower curtains business in America, received the largest payment, pounds 1.3m.

Sir Ronald Miller, the former chairman, received pounds 378,000. Nick Kuenssbereg, who left after just a year as managing director, received pounds 308,000 and John Embrey, the finance director, who left in November, was paid pounds 117,000.