It’s been a bad run for retail tycoons. Mike Ashley said this week he would bow out from the Frasers board, having handed over executive duties to son-in-law Michael Murray. John Hargreaves’s discount retailer Matalan is reportedly on the lookout for a buyer or a backer. Philip Green has been absent from the scene since Arcadia collapsed in 2020.
Then there’s Peter Cowgill. At first blush his unceremonious exit from JD Sports, announced in May, after 26 years looks like evidence of a board confident the era of the rag trade king is past. It was a triumph of corporate governance principles: one man was not more important than the imperative to separate the roles of chair and chief executive at a British public company. The shares hardly moved on the news of his departure.
The details of his pay-off, disclosed this week, tell a different story. They are all the more striking if the tale of the transition of power at JD is meant to be one of a new period of governance best practice. Because the exit deal looks much more like something from the bad old days of hefty handouts to good old chaps than it does modern remuneration policy.
The terms are these: Cowgill gets a year’s salary for his notice period, £2mn for a three-year consultancy deal, and £3.5mn for agreeing to a set of restrictive covenants that stop him advising or working for any of JD’s competitors for two years. He also can’t poach JD’s staff.
The general rule is that companies aren’t meant to pay executives more than they’re due under their contracts. The corporate governance code says that remuneration committees are meant to be “robust in reducing compensation to reflect departing directors’ obligations to mitigate loss”. Now the code isn’t binding, it’s a “comply or explain” affair. But that leaves JD with a fair amount of explaining to do if investors are meant to believe the business will be able to function just as well as a traditionally managed corporate affair rather than one man’s retail empire.
The evidence speaks to the contrary. Twelve-month restrictive covenants are common enough, but two year ones like Cowgill’s are almost unheard of because they are so legally tricky to enforce. They are meant to protect the confidential information of the business, not to stop an employee from supplying their natural talents to a rival. There might be logic for lengthy covenants to protect the sensitive intellectual property of a drugmaker or tech business. It’s hard to say the same of a trainer store.
Sure, Cowgill’s expertise will be valuable to his replacements. And his existing employment contract probably gave the board limited leverage to persuade him to go quietly, since his bonuses tended to be paid out in cash with no deferred element. But altogether JD is paying Cowgill an amount roughly equal to twice his average annual package over the past decade. That might be spread over three years, but it’s not like he’s going to be working full time for the company. More than half of it is so that he doesn’t work.
This arrangement is one struck out of fear of the damage a single person could do. That, for example, Cowgill could do a Martin Sorrell and spend his time attacking his former employer. Or what Phil Harris has done since quitting Carpetright in 2014: set up a rival whose main achievement has been to undermine the prospects of his former business. Cowgill could easily have taken up with the new owners of Footasylum, the trainer retailer JD has been forced by regulators to sell. £6mn-plus is an acceptable price not to.
It’s only acceptable because individual retail tycoons remain relevant. And Cowgill is far from the only example.
Ashley stepped back from Frasers only after orchestrating the succession exercise of what is essentially still a family business. It is entirely plausible he steps back up again if he doesn’t like the way things are going. The heirs to Philip Green’s empire are hardly proof that corporate managers perform better than individuals. Shares in Asos, which acquired Arcadia’s Topshop and Miss Selfridge brands out of administration last year, have fallen more than 80 per cent since that deal was announced. It is difficult to dispute the influence of Simon Wolfson at Next, or Mahmud Kamani at Boohoo. There is 30-year-old Ben Francis making his name at Gymshark.
Bosses do now have to adopt the trappings of good corporate governance. But sport the right look and individual retail kingpins’ influence endures.
cat.rutterpooley@ft.com
@catrutterpooley
City Bulletin
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