Bonus row rocks Durlacher board

THE controversy that led to the ousting of Durlacher chief executive Christopher Stainforth threatens to embroil non-executive directors of the mini-investment bank.

His departure last week was spurred by shareholder protests about extra payments of £392,000 shared between the Old Etonian and some of his colleagues.

The bonuses were paid for work they did when Durlacher asked investors for £10 million through a share issue last spring.

Investors were not told that part of the cash was going into executives' pockets.

The payments came to light last month when Durlacher issued results - though Stainforth had wanted them kept out of the profit-and-loss account.

Now, major shareholders are demanding to know exactly who approved the bonuses, and who knew that they had been made.

Durlacher refuses to discuss the affair and will not even confirm that Stainforth received part of the money, though he has admitted this himself and is thought to have pocketed £200,000.

But finance director David Liddell, who joined after the fundraising, told Financial Mail last week that he thought the payments had been approved by the three non-executive directors who make up the remuneration committee.

Insiders at the firm now say the payments were approved only 'informally' by the committee. It is not clear whether approval was given by the three members, or by only one or two directors.

And, astonishingly, one report says that the full board was not shown a record of the bonus payments, or of them having been approved. It was only recently, when directors were discussing drafts of Durlacher's figures for the first half of this year for release on September 23, that the full board learned of the bonus payments, according to a source.

At least two of Durlacher's biggest shareholders are now demanding more information about how the payments came to be made. 'It is a matter of principle,' said one of the fund managers concerned.

The suggestion that the bonuses were approved by the remuneration committee has thrown the spotlight on Durlacher's three non-executive directors. The key figure is chairman Tony Caplin. He is paid £76,000 a year for his non-executive role and also chairs the committee.

The other non-executives who make up the committee are Tory MP Howard Flight and Jack Wigglesworth, former chairman of the Liffe exchange.

Documents last year gave Flight's pay as £25,000. When fund managers wanted to voice their concerns about Stainforth, Flight was their first point of contact. Wigglesworth, 63, is paid £75,000 for his part-time role.

Meanwhile, the position of high-profile socialite Zoe Appleyard, with Durlacher since 2002, is to be reviewed by the bank's new chief executive, Simon Hirst, who took over from Stainforth. Appleyard says she is working on a specific 'collaborative arrangement.'

Appleyard, 31 this week, resigned from Durlacher in June. Since then, she has been employed as a consultant with the firm. She received about £25,000 of the £392,000 spring bonuses. Appleyard said: 'I raised money for Durlacher for which I was remunerated under the terms of my contract'.

Durlacher has been in talks to forge an alliance with highly regarded biotech investment expert Jeremy Curnock Cook. He heads Bioscience Managers, which provides corporate finance advice and runs an investment fund.