Thomas Cook has been accused of ignoring corporate governance rules by offering new chief executive Harriet Green a two-year notice period if it terminates her contract.
The company said in its annual report that the period is cut by one month every month for the first 18 months, until it becomes a more standard six-month notice period.
Green, who took over last July, has to give just six month’s notice.
The UK corporate governance code recommends a maximum notice period of one year.
Shareholder advisory group Pirc said the terms were a breach of best practice, the Daily Telegraph reported
“This is a significant breach of best practice and the disparity between the notice period for the company and the notice period for the CEO is striking,” a spokesman for Pirc told the newspaper.
“It protects the CEO at the time that she is an unknown quantity for the company. This serves only to shield the chief executive at the expense of the company.”
However, the newspaper acknowledged in a separate comment piece that Cook would not have attracted a chief executive of Green’s calibre with an orthodox one year contract. It said: “Green wanted some protection from the sizeable punt she was being asked (on behalf of Thomas Cook shareholders) to take.”
Thomas Cook’s annual report says: “Upon joining the company, the period of notice required to be given by the company to Harriet Green was 24 months, reduced by one month for every month served until 18 months have elapsed from her appointment date, giving an ongoing notice period of six months.
“This was considered appropriate in order to secure the appointment of Harriet Green.
“The period of notice required to be given by Harriet Green to the company is six months.”
Green admits in the annual report that there will “inevitably” be changes in leadership and she usually jettisons two-thirds of existing management teams.
“Inevitably there will be leadership changes – my usual formula is ‘a third, a third and a third’,” she writes.
“That’s a third of the existing team retained, a third coming from internal promotions and a third of the leadership coming in externally, bringing new strengths and skills. This pattern is already reflected in my direct report team.”
Cook’s annual general meeting is due to be held on February 7 in London.