Retail giant claims to be challenging fat cat pay excess with scrapping of controversial incentive scheme
Tesco has overhauled its pay policy for top executives in an attempt to head off a repeat of last year's shareholder revolt, when almost half its shareholders failed to back the supermarket group's remuneration report.
The new approach, revealed in the group's annual report published on Tuesday, will see the scrapping of an incentive scheme previously enjoyed by US boss Tim Mason. His pay was the subject of criticism at last year's AGM, especially from US institutional investors who complained it was excessive, given the big losses being racked up by Tesco's US start-up, Fresh & Easy.
Tesco said it is taking a new approach this year after a review and consultation with shareholders. The retailer's annual report stated: "In light of the renewed focus on a collegiate approach to remuneration, together with Mr Mason's appointment to the roles of deputy CEO and chief marketing officer, it has been agreed that Mr Mason will no longer be eligible for awards under the US annual or long-term incentive programmes. Mr Mason will therefore no longer participate in the US LTIP [long-term incentive plan] and the two million shares granted to him in 2007 will lapse."
Despite the changes, which will also see Tesco's current four long-term incentive plans merged into one single plan, chief executive Philip Clarke, who started his job in March, can earn an annual long-term bonus of up to 275% of his £1.1m salary, and a further 250% through a short-term bonus.
Meanwhile, Tesco is seeking to award the chief executive with an even higher pay-out in "exceptional circumstances". The report added: "To ensure that we have sufficient headroom to grant awards in exceptional circumstances, in line with usual practice, we are seeking shareholder approval to increase the maximum award opportunity under the PSP [performance share plan] to 350% of base salary".
The debate over boardroom pay has been reignited this week with a survey showing chief executives of blue chip companies enjoyed a median pay rise of 32% last year, compared with a 7% rise in the FTSE 100, and a 2% increase in workers' pay, according to pay consultancy MM&K and corporate governance group Manifest.
Tesco's annual report also revealed that former chief executive Sir Terry Leahy received £4.2m in the year to February, down from £5.2m the previous year.
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Source: http://www.guardian.co.uk/business/2011/may/31/tesco-executive-pay-policy
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