The chief executive of Next saw his pay for last year more than double, despite waiving his annual bonus to help mitigate the impact of coronavirus.
Simon Wolfson, the FTSE 100’s longest-serving CEO, was set to earn a total of £3.19m in the year to January 2020 compared with £1.33m in the preceding year.
The increase was largely due to the vesting of a long-term incentive plan, which resulted in a £1.72m payment compared with £108,000 the previous year.
However, all directors at the fashion retailer have waived their annual bonuses as a result of the coronavirus pandemic. That will reduce Lord Wolfson’s pay to £2.8m for the year ended January.
Nonetheless, the large headline increases in pay could still prove controversial at a time when Next and many other retailers are using the government’s furlough scheme, in which the government pays 80 per cent of the salaries of workers who have been sent home in the enforced lockdown.
The chairman of the company’s remuneration committee, former Land Securities boss Francis Salway, said that the sharp increases in executive pay were “an appropriate and proportionate outcome” given the company’s financial performance and the increase in its share price.
Earnings per share were up 5.6 per cent in the year to January while its stock price was up 87 per cent over 3 years.
Mr Salway also noted that executive pay at the retailer is below the median level for companies of Next’s size and that the policy “has a strong history of delivering value when performance merits this and of nil payouts when performance has been weaker”.
Remuneration for the current year is likely to be rather less lucrative, as the directors have already resolved to take a 20 per cent cut in basic pay for the duration of the crisis.
The company’s bonus policy is based largely around growth in earnings per share against benchmarks which are not disclosed until after the year has ended, while the long-term incentive plan is predicated on total shareholder returns compared to a peer group.
Next has already warned that coronavirus could almost wipe out profits. In its most extreme scenario, featuring four weeks of no revenues at all, pre-tax profit could drop from last year’s £729m to just £55m.
While it has been forced to close shops and furlough workers, Next is topping up the wages of those earning less than £2,500 a month — the maximum that the government scheme will pay out — to full pay for their contracted hours. Those earning more than £2,500 a month will be topped up to 80 per cent of their salary.
The company will also benefit from the business rates holiday extended to all retailers in England and Scotland, and most in Wales.
Next had opted not to declare a final dividend, saying it will consider the declaration of a second interim payment in June.
Last week, Tesco came under fire for declaring a final dividend while benefiting from the business rates holiday. The supermarket group said the additional costs it had incurred as a result of coronavirus more than cancelled out the £585m of business rates relief that it would receive.
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