Former Morrisons chief executive Dalton Philips doubled his pay last year to £2.1m and will receive a further £1.1m payoff despite being sacked after a slump in sales and profits at the supermarket chain.
Philips, who left in January, was awarded a £1m annual bonus in cash on top of his £850,000 salary, £213,000 in pension payments and £28,000 in benefits including a car allowance and private health insurance, according to Morrisons’ annual report published on Monday. Normally, the company defers half of directors’ annual bonuses in shares for three years but the board decided that strategy was not necessary as they were not trying to retain Philips’s services, which is cited as the main purpose of a deferral.
In addition, the Irishman will collect a £1.1m payoff in 12 monthly instalments. This includes salary, benefits and pension payments for up to 12 months after his exit. On top of his salary package and payoff, earlier this year Phillips collected shares worth about £475,000 relating to his 2011 annual bonus and could be in line for shares worth more than £500,000 in 2017 if performance targets are met.
Philips’s replacement, David Potts, could earn up to £5.1m if he meets performance targets. Like his predecessor, he will receive a basic salary of £850,000 and could earn up to double that in an annual bonus if he meets certain objectives. But Potts could also earn a further £2.55m in long-term incentive shares, or three times his salary, compared to a potential 240% possible for his predecessor.
Morrisons said it was giving Potts the opportunity to earn a higher than normal share bonus over the next three years as “an immediate performance driver and alignment with shareholders”. The former Tesco executive, who did not have a full-time role when he was hired to join Morrisons, will have to meet free cash flow, underlying earnings and total sales targets in order to collect the full award.
Potts’s potential earnings outstrip those of finance director Trevor Strain despite the executive’s 7% pay rise this year. Strain earned £1.2m last year, including a £490,000 basic salary and a £602,000 bonus. His basic salary will now be £525,000.