Alliance & Leicester bosses offered loyalty bonuses by new owner

Alliance & Leicester bosses offered loyalty bonuses by new owner

Alliance & Leicester bosses, who last month admitted defeat in their efforts to maintain the bank's independence, were today offered bonuses worth up to 125% of their salary by new owner Banco Santander if they agree to stay on until next December.

The Spanish bank said it would also be offering staff 100 free shares to encourage them to stay through the merger period.

Unions were expected to be upset by the rewards for a boardroom that was seen by many to have failed to protect jobs at the bank. Thousands of posts are expected to disappear in departments dedicated to processing mortgages and current accounts after the merger goes through.

Santander, Spain's largest bank, needs to win a shareholder vote before it can complete the purchase. Alliance & Leicester's board urged shareholders to accept the £1.3bn takeover offer as the best protection for their investment amid extreme financial market turbulence and the deteriorating outlook for the domestic economy.

A&L said that "significant external risks" remained and that the value to shareholders "of the greater certainty provided by being part of a larger organisation is considerable".

"The A&L Board sees no obvious circumstances that are likely, materially, to improve conditions in the financial markets or the broader economic outlook in the near to medium term, and has concluded that there is a risk of external events further eroding shareholder value," it added.....continued below

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in the document posted to shareholders, who are due to vote on the plan on September 16.

Santander is expected to merge A&L with its other British business, Abbey, to boost its market share, branch and customer network and to establish a "critical mass".

In a scheme document on the deal sent to shareholders, Santander said it would offer retention arrangements for "key employees" including A&L's four executive directors - chief executive David Bennett, finance director Chris Rhodes, risk director Richard Banks and IT director Ian Buchanan, hoping they will help smooth the transition process.

Bennett, who earned £764,000 last year while finance director, was expected to see his earnings remain flat despite promotion to the top job and a £600,000 salary. In 2007 he was awarded a £270,000 bonus which was not expected to be repeated this year after a sharp fall in the bank's share price. Under the Santander reward scheme he could earn £1.4m next year.

City analysts said the bonuses represented a sound investment by Santander. One said: "It is normal, sensible practice. You might call it good risk management from the company's point of view," he said. "It needs the top people to stay and run the business. It a business they like and want to build on, not asset strip. The executives also know where the bodies are buried."

The bonuses will start at 75% and rise to 125% of their basic salaries for remaining with the bank until the end of November next year. If they leave before then on good terms - ill health or redundancy - they will be entitled to a pro-rata payment, the bank said.

A&L shareholders are set to vote on the deal at an extraordinary general meeting on September 16.