Top bosses step aboard the risk-free gravy train

He recognised who it was straight away: Sir Philip Green, the billionaire Topshop owner and his close friend. Whether Green will make such joke calls to Marc Bolland, Rose's successor, remains to be seen. Probably not. He and Rose go back a long way and besides, Bolland is in line to collect £15 million merely by joining M&S. It's still a long way short of the wealth amassed by Green down the years but, even so, £15 million is a lot of brass for so far doing absolutely nothing.

In short, it's the sort of sum that entrepreneurs go into business to make. Entrepreneurs like Green himself, in fact. However, unlike Green and his fellow risk-takers, who stake their own money and often their houses on the success or failure of their businesses, Bolland's personal financial downside is minimal. If he's a flop at M&S, his reputation will suffer a bit (he's always got his previous success at Morrisons to point to) but that's about all.

It's the same with Adam Crozier at ITV. The broadcaster's bright new chief executive stands to earn £16 million over five years if he turns the company round. In leaving the Royal Mail he will collect £2 million under a three-year bonus scheme based on meeting efficiency targets. This, despite poor industrial relations and a series of national strikes hitting the postal service.

Again, it's an eye-watering sum. Suddenly, senior executive pay seems to have moved to another level — and at the end of a recession to boot. And not just that: these awards, and others, have come against a backdrop of a public outcry over excessive bankers' bonuses and MPs' salaries.

Therein, however, lies part of the problem. Those determining what the likes of Bolland and Crozier receive are the shareholders in the form of the board's remuneration committee. They're not small investors with a few hundred shares but non-executive directors chosen by the major institutional fund managers. In other words, they're picked by the very City that is in the firing line for how much it pays itself elsewhere. It's a matey, you-scratch-my-back world in which the idea of tough, eyeball-to-eyeball contract negotiations is hard to countenance.

It's also a world in which the balance is tilted in favour of the executive. In the case of both M&S and ITV, what is shocking is the lack of succession planning, the non-suitability of any internal candidates for what are two of the most important jobs in the country — running what is still a high street giant and the country's main commercial terrestrial broadcaster.

Neither company had groomed anyone to take over as CEO. You have to ask, where were the non-executive directors in all this? Why weren't they pressing to know who was lined up to succeed Sir Stuart Rose at M&S and Michael Grade at ITV? What, God forbid, would have happened if Rose and Grade had fallen under a bus? What then?
Resigned to going outside, the companies have discovered that the pool of senior executive talent is actually very small. UK plc has singularly failed to develop enough managers capable of taking charge of our top corporations. It's shocking and shameful, and needs correcting.
But boards also need to take a hard look at themselves. It may be that there are people we're not aware of who can run large commercial organisations. However, they don't get a look-in as directors, and the head-hunters they appoint prefer to go for stars with proven records elsewhere in British business. It's a safety-first option.

The result is that the likes of Bolland and Crozier can virtually name their price. In that respect, they're not much different from big-name footballers — if a club, or in their case a company, wants them, it is going to have to pay for them.

The football comparison does not stop there. Just as in soccer, a contract is not worth the paper it is written on. At Morrisons, Bolland was awarded share options. They were free to him, designed to lock him in for years to come. What does he do? And what does M&S agree to do? Buy him out of them. So he is paid £7.5 million in lieu of what he would have picked up had he stayed at Morrisons for three more years.

What appears not to feature in any discussion is that those shares cost him nothing. Why should he be paid £7.5 million for shares he has not even bought? They were given to him.

Of course, M&S could have told Bolland he had to choose: between Morrisons, a discount supermarket chain, and the mighty Marks & Spencer. In the old days, perhaps, there would have been little contest: Bolland would have begged for the M&S post and said to hell with Morrisons and the £7.5 million.

But M&S is desperate. Having not put in place a plan of succession, it is forced to look externally. It needs to find someone who meets with City approval and that means Bolland, who is credited with turning round Morrisons. Indeed, vindication for the M&S directors came on the day his appointment was announced: Morrisons shares fell, M&S shares rose.

Bolland was handed the share options to guarantee his loyalty. M&S comes along and he is out of the door. They merely pay him what he would have received and he is off.

At no point is Bolland or Crozier or any of their ilk asked to cough up themselves — to purchase shares in their employer at the current market price. What M&S should have said to Bolland was: "Yes, we agree to the £7.5 million but we're going to use it to buy shares in M&S." That approach would change everything. Executives would be risking their own money, not receiving free share options. Then they'd be entitled to the rewards that true risk-takers receive.