U.K. pushes Toys ‘R’ Us on CEO’s pay
Retailer faces questions amid ‘substantial’ operating losses after salary hits £1.3 million
LONDON— Toys ‘R’ Us Inc.’s U.K. unit, which is at risk of collapse, faces questions from lawmakers about a reported surge in payments to its former managing director.
The loss-making British arm of the U.S. toy retailer boosted Roger McLaughlan’s pay to £1.3 million ($2.2 million Canadian) in the year ended Jan. 30, 2016, from £1 million and £356,000 in the previous two years, Frank Field, the chairperson of the House of Commons’ works and pensions committee, said in a Dec. 18 letter to Toys ‘R’ Us U.K.’s current head, Stephen Knights. The letter, which was posted on a parliamentary website, cited a Daily Telegraph report.
Field asked how the increases were justified at a time when the U.K. business had “substantial” operating losses and a “sustained deficit” in its pension scheme. He also asked how the retailer decided on the division of resources between executive pay and topping up its pensions pot.
The questions add to pressure on Toys ‘R’ Us U.K. management as they struggle to reach a deal with a pension bailout fund ahead of a key cred- itor vote on Thursday. Pension Protection Fund, or PPF, intends to vote against the retailer’s restructuring plan, which centres on shutting at least 26 stores, potentially scuttling the proposal. The retailer has said defeat will likely lead to administration or insolvency.
PPF is open to changing its vote if Toys ‘R’ Us U.K. comes up with an “acceptable” way of tackling the pension shortfall, it said in a Dec.19 letter to Field. The company rebuffed the bailout fund’s own proposal, which entailed Toys ‘R’ Us U.K. adding £8.9 million to its corporate pension pot within a few months, according to the letter. The retailer has offered a plan that would eliminate the pension deficit within a decade, and include higher-than-scheduled payments early next year, Sky News said on Wednesday, without identifying the source of the information.
Representatives for Toys ‘R’ Us U.K. and PPF declined to comment.
Toys ‘R’ Us, the Wayne, N.J.-based parent company, filed for court protection in the U.S. a few months ago after struggling with online competition and debt from a $7.5-billion (U.S.) leveraged buyout in 2005. U.S. same-store sales fell 7 per cent from a year earlier in the three months ended Oct. 28, the company said on Tuesday.