First Choice ousts chief exec at cost of pounds 640,000

Francis Baron was ousted yesterday as chief executive of First Choice Holidays, and will receive pounds 640,000 in compensation under the terms of his service contract with the tour operator.

News of the pay-off, equivalent to two years' salary, is likely to cause consternation among institutional investors and reignite the "payment for failure" debate raging in corporate governance circles.

During Mr Baron's three-year tenure at the helm of First Choice, the share price more than halved, while in the year to October 1995 the company reported a pounds 3.4m loss before exceptional items, having made profits of more than pounds 30m in the early nineties.

First Choice blamed Mr Baron's sudden departure on a clash of personalities in the boardroom. "Unfortunately, his relationships with many of his key colleagues have become unworkable and in these circumstances the board felt the continued progress of the group would be compromised if Francis remained as group chief executive," said Michael Julien, the chairman.

Mr Baron, whose management style was described by insiders as "authoritarian", responded: "It is a pity that these differences could not have been resolved, but there are some battles you can win and some you can't."

Peter Long, managing director of the group's UK tour operating division, will take over as group managing director, while Ian Clubb, currently non-executive deputy chairman, will assume a full executive role.

It is understood that matters came to a head at a board meeting last Friday when three directors - Mr Long, finance director David Gill, and Ken Smith, managing director of Air 2000, the in-house airline - insisted either Mr Baron went or they would resign en masse.

Mr Baron, who joined the group in 1993 when it was known as Owners Abroad, is credited with masterminding the company's revival and successful rebranding exercise, which propelled the company into third place as the UK's leading tour operator, behind Thomson and Airtours.

But profits nose-dived as holidaymakers, faced with rising levels of job insecurity, higher rates of personal taxation and a weak pound, stopped booking early or simply stayed at home.

Perhaps Mr Baron's biggest achievement was to secure a pounds 44m rescue rights issue last year to fund expansion in Canada.

His departure raises the prospect of this year's dividend being cut. Mr Baron is known to have wanted to reward those investors who backed the company in the rights issue by maintaining the payout.