Cash for quarrelling

Martin Sixsmith: Paid a high price for losing his job

In the fallout over the Byers-Sixsmith affair, one detail has been overlooked - that the former transport media chief got £200,000 for having a bust-up with his boss.

Anger management is one of the latest trends doing the rounds in boardroom circles. And perhaps with good reason.

Venting one's spleen in the office is not only bad for corporate karma, it can also be pretty costly, as transport minister Stephen Byers has discovered.

Stephen Byers faced down a storm in the House

Mr Byers' former press director, Martin Sixsmith, has walked away from the job with a £200,000 pay-off after a well publicised spat between the two earlier this year.

He may be out of a job, but he managed to hit the jackpot on the way to the exit.

So how did he manage that?

The terms and conditions of his pay-off are of course confidential, but "golden goodbyes" are now quite normal for those who get pushed off the higher rungs of the corporate career ladder.

Sour relations

The pay-off is a convenient and expedient means of ditching an employee who could not simply be sacked, says employment lawyer Paul Grindley.

"Grr, with this sort of attitude I could pay off my mortgage in one go"

"You can only sack someone for gross misconduct. The pay-off is there to reflect a situation where the working relationship between a top employee and the company has broken down.

"They haven't actually done anything wrong, but they no longer see eye to eye."

Disagreements like this occur at all levels of business, but in most cases it's cheaper and easier for an employer to put up with the unrest.

When that sort of strife is going on at director level, it can damage confidence in a company and unsettle shareholders. Hence the need to nip it in the bud with a skilfully negotiated resignation.

Golden farewells - top 3 for 2001

Klaus Esser, Vodafone, £9.1m

Jim Mueller, Invensys, £3.2m

David Allvey, Barclays, £1.6m

In fact, compared to many directors, Mr Sixsmith did not do as well as you might think. According to Labour Research, the average pay-off for a departing director last year was just over £700,000.

Topping the league by a long way was Klaus Esser who was given a £9m "appreciation award" to bow out as head of German electronics firm Mannesmann after it was taken over by the UK's own Vodafone.

Another notables include:

Sir Peter Bonfield, who netted £820,000 from British Telecom for agreeing to leave a year early. During his time at the top, the telecoms giant amassed a debt of £30bn and its share price slumped by 70% in the final 18 months.

John Hoerner, who pocketed £1.3m from the fashion chain Arcadia (owners of Top Shop and Dorothy Perkins) after his spell as chief executive coincided with the share price falling from about £4 to 50p.

Gerald Corbett, who walked away from the ill-fated Railtrack with £444,000.

A good head for figures

These six and seven figure sums are the result of some complex calculations, says Mr Grindley.

At this level of business, fixed-term contracts are common as are lengthy notice periods.

While most of us are used to a maximum three-month notice period, directors are often locked into a company for 12 months or even two years.

So when a company finds their face doesn't fit and wants to get rid of them quickly, they have to compensate for this period of notice.

Other benefits

"These pay-offs are typically a form of compensation for the unexpired period of the contract and in lieu of notice served."

Last year 14 executives received pay-offs of more than £1m

In addition to this, there are a whole host of other benefits - for example, company car, pension, share options, private health care - that the departing director may have to give up.

Again, loss of these will need to be compensated for in cash.

Call it avarice or just good business sense, but these sort of pay-offs were supposed to be a thing of the past.

In the mid-1990s, following a string of "fat cat" outrages in the press, the government-appointed Greenbury Committee recommended golden handshakes should be avoided in rewarding poor performance.

So far, there has been little evidence of this sort of restraint.