Two directors quit Sainsbury after Davis pay debacle

J Sainsbury yesterday ousted the two non-executive directors blamed for the biggest corporate publicity disasters to hit it this year - beyond its sliding sales.

J Sainsbury yesterday ousted the two non-executive directors blamed for the biggest corporate publicity disasters to hit it this year - beyond its sliding sales.

The group said Keith Butler-Wheelhouse, the chief executive of the aerospace group Smiths, and Lord Levene of Portsoken, the Lloyd's of London chairman, had quit its board. Their departure is part of Philip Hampton, Sainsbury's newly appointed chairman's, attempt to restore investor confidence in the embattled supermarket group.

Mr Butler-Wheelhouse, who headed Sainsbury's remuneration committee, bore the brunt of shareholders' anger over a multi-million pound pay-off to Sir Peter Davis, who in June was forced out of the group he was appointed to turn round.

Meanwhile, Lord Levene, the company's senior independent director who chaired the nominations committee, saw his reputation tarnished after he spearheaded a decision to appoint Sir Ian Prosser, formerly of Bass, to succeed Sir Peter as chairman. A shareholder revolt forced Sainsbury's to withdraw its offer before the ink was dry on Sir Ian's contract.

Separately, Sainsbury's revealed it had agreed to pay Sir Peter the bulk of his controversial pay-off. The former Prudential boss will receive £2.62m cash in lieu of some 1.3 million shares he was set to receive. His total pay-off is likely to top £3m because he will receive his £500,000 annual salary each month until next July, unless he gets a job elsewhere before then.

Sainsbury's agreement with Sir Peter represents a partial victory for the supermarket group, which had originally promised to pay him an additional £1m. "Strenuous efforts were made through legal representation to reach a settlement," it said.

Lord Levene said yesterday that he had tried to step down in August, blaming other commitments, but Mr Hampton had asked him to stay on. Lord Levene said that after being told on Wednesday that the board planned to settle Sir Peter's payout rather than continue to fight the matter, he "felt unable to support the proposed way forward".

Mr Butler-Wheelhouse said: "I am pleased that we have been able to achieve resolution to this issue. I believe it is now the right thing for me to step down and for the company to move forward."

Mr Hampton, the former finance director of Lloyds TSB, has told Sainsbury's institutional investors that he plans to appoint new, younger non-executive directors.

Shareholders yesterday reluctantly backed the board's decision over Sir Peter's payout. One large investors said: "We still don't believe he deserves anything given his record at the company. But we are grateful to Sainsbury's for putting up a fight and we think it's a good result, especially with the two non-executives going as well."

Another investor said: "We had previously expressed our dissatisfaction at the absence of transparency surrounding executive remuneration at Sainsbury's.... We are looking forward to engaging in a constructive dialogue with the new board."