KATE SWANN, the chief executive of WH Smith, is set for a £3.9 million windfall if she succeeds in improving the fortunes of the books and magazine retailer within three years.
WH Smith, which two months ago fended off an £865 million takeover attempt by Permira, the private equity group, last night disclosed a new incentive scheme for 40 of its most senior executives.
The scheme is contingent on executives investing their own money in WH Smith shares. The share price will have to reach at least 440p, and its earnings per share (eps) almost 33p, for the bonuses to kick in.
Should Ms Swann achieve the maximum performance threshold — a share price of 557p and eps of 41.7p — she will be rewarded with £3.9 million of WH Smith shares.
Analysts are forecasting WH Smith to deliver 19p of earnings per share this year. The shares closed at 305p yesterday.
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The incentive scheme will need approval from WH Smith’s shareholders at an extraordinary general meeting later next month.
It is understood that the Association of British Insurers, the institutional shareholder group, has been consulted about the incentive scheme. However the National Association of Pension Funds, another influential City body, said last night that it was unaware of the details of the scheme.
WH Smith said the performance hurdles were steep and the rewards justified.
A spokesman said that Ms Swann would be eligible for the maximum reward only if WH Smith’s market capitalisation almost doubled to £1.3 billion in three years.
Ms Swann, the former Argos boss who joined WH Smith last November, is paid a basic salary of £475,000 a year.She received a “golden hello” package worth more than £1 million and was guaranteed a bonus worth 46 per cent of her salary when she joined the retailer.
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Ms Swann’s new bonus structure means she has to preside over an average eps growth of about 20 per cent a year for three years to be eligible for some reward, and an annual improvement of 30 per cent for the maximum bonus.
WH Smith confirmed last night that it would distribute most of the proceeds of its £223 million sale of Hodder Headline, its publishing business, to shareholders. They will receive a payout of 85p a share.