Compass vows to link future rewards to performance

Compass Group has vowed that executive pay will be far more closely linked to the company's performance in future after controversy arose over the reward packages handed out to two former directors.

The caterer's annual report, released last week, revealed that former group chief executive Mike Bailey pocketed £830,000 in performance-related pay in 2006, despite leading the company through three profit warnings and a UN contract scandal.

Bailey, who retired on 31 May 2006, earned nearly £1.6m in the year to 30 September 2006 overall, at a time when the company's profits and share price were down and its policy of top-line growth was under fire.

Alain Dupuis, who resigned as chief executive of Compass's Asia and the Middle East department on 1 October 2005, pocketed nearly £1.6m in severance pay after the company bought him out of a consultancy contract early.

Bailey and former chairman Sir Francis Mackay, who stepped down in June 2006, retired with pension pots worth £13.06m and £15.76m respectively.

Karl Green, analyst at Credit Suisse, said most FTSE100 companies now recognise that remuneration has to be linked more closely to the company's financial and share price performance.

"In the global job market the level of salary some executives attract isn't obscene," he said. "However, when there is a clear disconnect between executive earnings and the company's performance, as there was at Compass, it's different."

Kevin Lapwood, support services analyst at Seymour Pierce, said the problem at Compass was how the bonus scheme was structured. "All you had to do to get your bonus was to keep bringing in the contracts. It was all about the top line," he said. "It's now about return on capital and other profit measures that benefit shareholders."

A Compass Group spokesman said Bailey took only what had been previously agreed, adding that there was no additional payment when he left and he waived his right to cash in the majority of his share options. "Moving forward, Compass wants to be seen to be rewarding work and commitment and to be as transparent as possible," he said.

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By Chris Druce

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