Debenham's lowers performance criteria for bosses long-term bonus scheme

Debenhams has watered down the targets its bosses need to hit to receive multimillion-pound paydays, saying the lower hurdles reflect “ongoing challenges in the UK retail sector”.

The struggling department store chain, whose chief executive resigned in October after a wave of shareholder unrest, has softened the performance criteria for its long-term bonus scheme.

The move is likely to prove controversial given investor pressure over poor trading and a flat share price this year. The performance share plan (PSP) is designed to tie in key managers, allowing them to earn multiples of their base salary each year.

The awards are in shares that vest after three years, if targets are met. In recent years, 75 percent of the payout has been based on growth in earnings per share and 25 percent on return on capital employed — a measure of a company’s profitability.

For this year’s bonuses, Debenhams has lowered the earnings-per-share growth hurdles, halving the minimum threshold to 3 percent. Also, it has almost entirely replaced return on capital employed — which has plunged in the past five years — with four other targets linked to margins, online and international growth and in-store sales. Outgoing boss Michael Sharp, who will depart next year, could earn up to 922,500 pounds in deferred shares this year and 307,500 pounds next year under the new arrangements. Debenhams said the changes were made “following shareholder consultation” and were approved at last year’s annual meeting. The company added: “These PSP targets were, and remain, both challenging and consistent with our strategy.”