Money to burn: how EMI's profligate bosses filled a house with 20,000 worth of candles

Music executives spent millions of pounds on houses that lay empty. Ten of thousands went on hiring accommodation for friends of the stars. Bundles of presents and bunches of flowers were lavished on a chosen few on a daily basis. Such was the degree of excess in the music business, as revealed by EMI which has now drawn attention to a period of high living among the executives and power-brokers who ran the company until recently.

Guy Hands, the new chairman of the record group, has sent a confidential document to potential investors detailing the spending under the former head Eric Nicoli. This included 5.6m on a three-bedroom townhouse for Mr Nicoli in Park Lane, central London, that he was said to visit as infrequently as once a fortnight. There were also vast severance packages for executives.

The management of the label is said to have been costing the company about 100m a year, according to the leaked memo. Mr Hands' private equity firm Terra Firma has said it wants to transform the culture at EMI, which industry insiders see as outdated in its excessive spending.

Other practices exposed in the memo include multimillion-pound advances for acts that were unlikely to recoup the cost, and the lavishing of Christmas presents on artists. Excessive severance pay for executives also came under fire, as it emerged that in previous years, five-year severance packages had been offered to senior executives. The memo said one senior executive would receive a severance package worth 10m if his contract was terminated.

The abolition of frivolity seems to be Mr Hands' aim, as he also revealed the small fortune spent on candles and flowers 20,000 was once spent decorating a Los Angeles apartment used to entertain artists and hangers-on, while 200,000 is spent every year on fruit and flowers for EMI's London offices.

These proposed cuts follow earlier announcements from Mr Hands of "a fundamental change" at the label, whose artists include Robbie Williams at EMI records, and Kylie Minogue and Lily Allen at Parlophone. Last month he issued a warning to recording artists "who simply focus on negotiating for the maximum advance".

It is believed that Mr Hands is keen to emphasise the mistakes of previous management in order to secure investment for the company, which is estimated to have lost 200m of its 2.5bn loan from Citigroup. The inefficiency of EMI would have made it an unattractive prospect for investors in the music industry, which is already in crisis, so Mr Hands is said to be courting further investment by revealing his plans for streamlining.

In a previous memo, Mr Hands had threatened to "unpick" executive pay packages at EMI, claiming they were part of a system that did not "encourage the right behaviours or reward the right actions". Mr Hands continued in this earlier leaked message: "What worries me is that the existing structures have been put in over a couple of decades and unpicking them in a way that releases the good in the company is not going to happen overnight."

As part of Terra Firma's rehaul, Mr Hands has also brought in the former government adviser Lord Birt to compile a report on how pop stars are marketed, promoted and looked after across EMI's different labels.

The download market has already caused a profit slump in the music business, with CD sales in the US market down 18 per cent, and the overall American industry down 10.2 per cent this year. So in what appears to be an attempt to make Terra Firma's latest purchase which insiders say the private equity firm overpaid for at 2.4bn seem less ill-advised, Mr Hands has catalogued the excesses of his predecessors.

Yesterday, neither Terra Firma nor EMI were willing to comment on the previous management, or proposals for changes to the way the company is run.

Executive excess

5.6m

The expected sale price of a Park Lane mansion provided for the former EMI manager Eric Nicoli and used by him only once a fortnight.

200,000

The estimated amount spent by EMI on fruit and flowers every year for the company's West London offices.

20,000

The monthly cost of candles used to decorate a Los Angeles apartment used by artists and their hangers-on.

10m

The reported severance deal that one senior executive would get if his contract was terminated.

$15m

A recording advance given to one of EMI's top artists, before they had even entered the studio.