Round two in DFS share option fight

FURNITURE tycoon Lord Kirkham, forced into a humiliating climbdown last year over massive share option windfalls for executives and managers, is attempting to win backing for a new scheme at his DFS group.

But at least one of the company's largest investors wants more concessions from Kirkham because, it says, the performance targets that would trigger payouts are still not tough enough.

News that DFS is again trying to win shareholder backing for its rewritten incentive scheme comes just days after insurance giant Prudential was forced to rethink a controversial share options plan that would have given chief executive Jonathan Bloomer £18m over three years.

The scheme was withdrawn after an eleventh-hour revolt by shareholders, as revealed by Financial Mail last week. DFS was forced to ditch its previous pay proposal only days before the company's annual meeting in December following shareholder pressure. It planned to raise the value of share options for managers and executives without setting higher performance targets.

This time, the DFS remuneration committee, chaired by former Iceland boss Malcolm Walker, is planning to increase the value of options by 50%. It promises that the company's earnings per share will have to rise by 9% more than the rate of inflation over the next three years before share options are handed out.

But a source at one of the company's shareholders, an investment group that has been consulted on the proposals, told Financial Mail: 'The performance targets are still not demanding enough.

'With the company's store-opening programme and share buy-backs, those growth rates are almost guaranteed.' But the source added that if DFS was prepared to raise the performance targets, the rest of the scheme would probably gain support.

DFS admitted it was consulting major shareholders over the new proposals, which are primarily intended to motivate its middle ranking executives and store managers, who typically earn £40,000 a year.

An extraordinary meeting of shareholders will be called soon because the company wants to install the new incentive plan quickly without waiting until its routine annual meeting, scheduled for the end of the year.

Kirkham, who bailed out the Conservative Party with a £4m loan in 1995, is the largest shareholder in DFS, but it is believed he will not vote on the new options scheme.