Grand designs: Burberry chief could receive £50m in share handouts

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Powered by Guardian.co.ukThis article titled “Grand designs: Burberry chief could receive £50m in share handouts” was written by Jill Treanor, for The Guardian on Monday 8th June 2015 18.45 UTC

Christopher Bailey, the fashion designer who was put in charge of the luxury label Burberry last year, could be given shares worth up to £50m from free handouts and shares awarded for bonuses over the coming years.

Details of the huge potential rewards were revealed as the fashion group attempted to prevent a shareholder revolt over boardroom pay by issuing a detailed explanation of the £8m in shares and cash paid to Bailey last year.

The luxury retailer, known for its trademark beige check, admitted it had not previously given a “sufficiently clear” explanation of Bailey’s remuneration.

The company was responding to shareholders’ concerns after last year’s AGM, when 52.7% voted against the pay deal for Bailey, who had just been appointed to replace Angela Ahrendts after her departure to become Apple’s retail boss.

Burberry’s effort to appease investors comes before the AGM of WPP on Tuesday when the advertising company is also braced for a row over a £43m pay deal for its boss, Sir Martin Sorrell.

When Burberry promoted its designer Bailey to the role of chief executive, it allowed him to retain his previous title of chief creative – and some light was shed on his pay deals.

But it was not until Burberry’s annual report was published on Monday that the size of Bailey’s shareholding was revealed.

While he owns 300,000 shares outright, he could end up with more than 3m – worth almost £50m at current share prices – from free awards and shares with performance criteria attached.

In a letter to shareholders, Ian Carter, the non-executive director who chairs Burberry’s remuneration committee, describes Bailey’s importance to the company in the 14 years before he was installed as designer.

“Over that period, he led the creative side, overseeing everything the customer sees and touches including brand imagery, product design and development, creative marketing and architecture,” said Carter, who is also president of Hilton Hotels.

Carter admits that “the quantum and structure” of Bailey’s pay look unusual in a UK context. Bailey has a salary of £1.1m as well as a £440,000 “cash allowance”, and in the 2014-15 financial year Bailey received a total of £8m. That included £4.4m from a longterm incentive plan together with his salary, allowance and annual bonus of £1.7m.

In the past he has been awarded shares in exceptional bonuses: 350,000 in 2010, which he will receive in the coming weeks; and in 2013, to stop him leaving, he was awarded 1m shares – worth £15m. “Put simply, the market value for his creative talent was far in excess of what he was earning,” said Carter.

The company also revealed that Bailey has agreed to increase his personal shareholding in the company by the time of this year’s AGM on 16 July.

He is to take immediate steps to increase his outright ownership to 500,000 shares. However, he will do this not by buying shares in the company – which change hands at about £16.50 each – but by agreeing not to sell all 350,000 of the shares awarded to him in 2010. These are due to be handed over just before the AGM and he will keep half to “demonstrate his commitment to Burberry and alignment with shareholders”.

Bailey was also awarded 500,000 shares, which will be released to him between 2017 and 2019, when he was promoted last year. The company has now provided more detail about the performance criteria attached to these awards – a mixture of financial, strategic and personal targets.

Carter said: “Christopher Bailey is clearly in demand in the international luxury space and the board is delighted that he chosen to stay at Burberry”.

The annual report said that Bailey will not receive a rise in his salary this year but it also revealed that the new finance director Carol Fairweather had an 11% rise on her salary, to £500,000, last year.

It also shows that Ahrendts – named as the highest paid woman in the US when she received .6m as a result of her signing-on fee from Apple – was paid £150,000 last year from Burberry under the terms of her departure package.

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