A billion reasons not to cut bonuses for M&S

M&S staff are facing a bonus pool cut, despite the retailer making its biggest profit in ten years...

Last Updated: 06 Nov 2012

Marks & Spencer, which reveals its full-year results this week, is apparently planning to cut its staff bonus pool by more than 70% this year – even though it’s due to report profits of more than £1bn for the first time since 1997. That’s going to be a tough sell for boss Sir Stuart Rose – and hardly the best way to boost staff morale during a consumer spending slowdown…

According to the Sunday papers, last year’s bonus pool of about £90m will drop to about £25m this year, because the retailer has failed to meet its demanding financial targets. That means staff who pocketed a bonus of about 10% of their salary last year will get less than half that this time round – better than nothing, admittedly, but not the kind of news you want with the UK economy going to hell in a handcart (well, depending who you believe).

M&S seems to have been hit harder than most by the recent slowdown in high street spending. Rose reported his first fall in like-for-like sales in more than two years a few months ago, saying that conditions were as bad as they’d been for a decade. Since then the row over his elevation to executive chairman has further tarnished his halo.

Of course Rose himself will lose out too – last year he took home an additional £1m on top of his £975,000 salary and share options, whereas this year he’s likely to get nothing. Like BA’s Willie Walsh last week, he may be hoping this will appease the critics to some extent (although it turns out Walsh may be getting £500k in stock to ease his pain, so we won't feel too sorry for him if that's true).

But the problem is that it’s tough to report bumper profits and a cut to the bonus pool simultaneously – particularly when over at John Lewis, staff are picking up big bonuses (more than 20% of salary, in some cases). It may be a sign of the times, and an accurate reflection of the company’s recent performance - but it’s still going to be a big blow to morale. And if Rose is going to get M&S back on top, he’s going to need everyone pulling for him.

What’s more, he’ll have to pull a rabbit out of a hat to prevent next year being even worse – analysts reckon the retailer’s profits will shrink by 20% in the next 12 months. But to be fair he’s has hardly put a foot wrong during his time in charge – so if anyone can pull it off, it’s probably him...

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