UK: Tesco investors attack executive bonus plan

Publisher Name: 
The Independent

Anger is mounting over
a new bonus scheme at Tesco that will reward chief executive Sir Terry
Leahy with a £11.5m windfall if the supermarket group's US venture
Fresh & Easy succeeds.

One in six Tesco shareholders have refused to back the scheme, it emerged at the company's annual meeting yesterday.

The Fresh & Easy convenience outlets are due to open in Los
Angeles, Phoenix, San Diego and Las Vegas from November and the company
aims to have 250 stores by the end of 2008.

More than 16 per cent of the proxy votes sent into the supermaket
before its AGMwere not in favour of the remuneration package, which has
also been criticised by the corporate governance body, Pirc, as
"excessive".

The supermarket also came under fire from shareholders yesterday
over the conditions of workers employed by some of its overseas
suppliers. South African fruit picker Gertruida Baartman, who first
confronted the board last year, attended the AGM in central London
again, holding a single share supplied by anti-poverty agency
ActionAid. She said little had changed in working conditions at the
Tesco supplier that employs her, and claimed that the supermarket had
broken its promise to ensure she wouldn't face recriminations for
speaking out as she was sacked shortly after.

She has since got her job back due to the intervention of trade union groups.

Ms Baartman said: "It would take me four hours to earn enough money to buy a bag of Tesco pears that sell in the UK for £1.39."

Mr Leahy, who received £4.62m in cash and shares last year, would
benefit from up to 2.5 million shares under the New Business Incentive
Plan if Tesco cracks the US.

Tim Mason, the president of the US operations and chief executive of
Fresh & Easy, has defended the remuneration scheme and said the US
business was Sir Terry's idea. He said the Tesco chief wrote the
business plan with the working title Fresh & Easy more than two
years ago.

Mr Mason said the chain would differentiate itself from its
home-grown competitors by offering healthy convenience foods for
families. "Modern supermarket shopping in the US does not always
reflect modern life in America," he added.

The New Economics Foundation, a think-tank, called on the
Competition Commission yesterday to include an assessment of evidence
of Tesco's "growing level of dominance" and the plight of workers
overseas in its inquiry into the major supermarkets.

Policy director Andrew Simms said it would take "more than 47,000
years for one of the Bangladeshi workers, who earns about 5p an hour
making garments for sale in Tesco, to earn what Sir Terry was paid last
year - and that does not include the chief executives' extra share
award".

AMP Section Name:Executive Compensation
  • 186 Financial Services, Insurance and Banking
  • 208 Regulation