Scottish Daily Mail

It’s no wonder they are so keen to sell!

As bosses milk millions from foreign takeovers . . .

- by Ruth Sunderland

WHEN companies are taken over, most employees are fearful for their jobs. Not so the men – and the small handful of women – at the top. They have no need to fret over their future under a new owner.

Quite the reverse: any regrets they may have at losing their job are likely to be wellcushio­ned by a multi-million pound payment. Welcome to the Golden Sellouts.

In the past few weeks alone there have been some truly eye-opening windfalls for British executives who have succumbed to foreign predators.

Jim McCarthy, the former boss of Poundland, will receive nearly £23m when the budget shop chain is taken over by South African retailer Steinhoff – but his case, believe it or not, is actually much more justifiabl­e than some.

A major investor with a holding of 10m shares, or 3.77pc, McCarthy spent a decade building the company to a chain with sales of nearly £1bn a year before stepping down this summer.

McCarthy’s £23m is a stupefying­ly large sum to Poundland shoppers, but at least he spent ten years of his life successful­ly running the business.

Not so Helge Lund, the former chief executive of BG, who was paid £5.5m when he former FTSE100 stalwart was taken over by Shell earlier this year, plus 9.7m of shares he received in February.

Not bad considerin­g he only spent around 12 months at the oil exploratio­n and production company.

The row over Lund’s rewards began before the merger, when he was hired from Norway’s Statoil with a £12m golden handshake. It was subsequent­ly cut to £10.6m to placate angry shareholde­rs, but still – nice work if you can get it.

In another high profile bid, the bosses of British chip designer ARM, which is being taken over by Japanese technology giant SoftBank, are in line for tens of millions. Chief executive Simon Segars will be handed £11.36m, whilst chief technology officer Mike Muller will get £21m.

How is it that bosses manage to bag such large sums in a bid? For starters, most will be entitled to a year’s pay, benefits, and annual bonus. That will add up to six figures. But they will also be able to cash in on the thousands of shares they have in the company: often this will yield a large sum because most bidders pay a decent premium.

On top of that, the pay committee may have discretion to allow executives to cash their long term options in full in a takeover. Many will also have a well-stashed pension pot containing several millions.

Far from having any real motive to defend their company, Golden Sellout executives have every reason to put out the bunting when a bidder arrives.

THEY may show some token resistance aimed at squeezing out a higher price, but usually it’s a matter of time before they are rolling over.

Those that genuinely put up a fight, such as drugs group AstraZenec­a, which repulsed a bid from US giant Pfizer, are relatively rare.

Critics say the vast personal gains are encouragin­g the trend for British businesses to be gobbled up by foreign predators, to the detriment of the economy.

The issue first emerged when American Todd Stitzer, former chief executive of Cadbury, received a payout of around £20m from cashing in millions of performanc­e shares as a result of the £11.4bn takeover by Kraft in 2010. He also had amassed a £17.4m pension pot.

Campaigner­s say the system is in need of reform. ‘This is just another example of how executives can’t lose,’ says Stefan Stern, director of the High Pay Centre. ‘Everyone has their price. It raises the question of how objective can you be about the future independen­ce of the business as an executive when you know the deal will reap such personal rewards. Theresa May ought to look at this,’ he adds, referring to the Prime Minister’s comments that she wants to see better boardroom behaviour. ‘You really want the chief executive to look at a deal objectivel­y, and not to think, “Wahey! I can cash in”.’

Frustratin­gly for ordinary employees, customers and small shareholde­rs, it is impossible to say exactly how much a chief executive will receive until a figure is published after the bid has gone through. Bosses frequently react with fury when journalist­s and others try to make an educated guess ahead of that – even though it is highly relevant to investors and the public at large to know exactly how well incentivis­ed executives are.

London Stock Exchange chief Xavier Rolet, for instance, insists a bid by Germany’s Deutsche Boerse is in the best interests of investors and the market.

He has seen his personal holding of more than 500,000 shares rise significan­tly from the £12m they were worth before a bid was lodged. There is no reason to doubt Rolet’s sincerity, but however honourable an executive is, it is hard for the mind to remain unclouded by the prospect of such huge gains, even if only at a subconscio­us level.

Alan Clark, the boss of SABMiller, could receive as much as £70m when the drinks giant he leads merges with AB InBev.

In other countries, they do things differentl­y. When mobile phone operator Vodafone paid bonuses to executives of German group Mannesmann after it took over that company in 2000, it ended up in court. A group of Mannesmann supervisor­y board directors were tried on breach of trust charges for approving around £50m of bonuses to departing executives after the takeover. The case dragged on for years before directors agreed to pay a settlement without admitting guilt.

HERE, however, takeover windfalls are just another top person’s perk. One of the biggest winners was Neil Berkett, the former chief executive of Virgin Media, who received a £58m pay-off following a 2013 deal with US group Liberty Global.

Corporate governance expert David Pitt-Watson, who has cowritten a book called What They Do With Your Money, says the prospect of payouts is likely to ‘weaken the resolve to repel a bidder’.

‘It illustrate­s how it is impossible to set out a contract that precisely encourages people to manage companies well.’

Takeovers come with downsides. Apart from the obvious one of job losses, if they denude the stock market of blue-chip companies then it becomes harder for ordinary savers to find decent investment opportunit­ies.

Bids are not invariably a bad thing – in an efficient market, they are an essential Darwinian mechanism for weeding out complacent companies.

They should be a deterrent to poor management. But if the reaction, as the predators’ Jags roar up the driveway, is unbridled glee, then the system isn’t working.

 ??  ?? Krafty move: Cadbury boss Todd Stitzer made millions when he sold out to the Americans
Krafty move: Cadbury boss Todd Stitzer made millions when he sold out to the Americans
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