A number of shareholder lobby groups have signalled their intention to vote against Tesco’s remuneration report at its AGM next week, citing “excessive” salaries and incentives.
The UK retailer’s annual general meeting is scheduled for a week on Friday, and it will be chief executive Sir Terry Leahy’s last shareholder meeting after 14 years at the helm.
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However, corporate governance firm Pensions Investment Research Consultants (PIRC), said Tesco’s combined awards under the annual bonus and long-term incentives are considered “highly excessive”, particularly in light of high executive salaries.
“Last year Sir Terry Leahy was the second-highest paid director within the FTSE 100 consumers services sector in terms of salary and average directors’ salaries are within the upper quartile of the comparative group. PIRC considers that long term incentives should use two performance criteria concurrently, one with a comparator group, and that separate schemes should utilise different criteria to avoid rewarding directors twice for the attainment of a single performance measure,” the firm said.
It added: “The executive directors have one-year rolling service contracts, however directors could receive termination payments in excess of two years salary, contrary to best practice. We recommend shareholders oppose the remuneration report.”
The CtW Investment Group is also urging shareholders to “vote no” on Tesco executive pay.
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By GlobalData“Tesco shareholders are troubled by the Tesco board’s apparent willingness to modify performance targets to award pay for failure,” said William Patterson, CtW’s executive director. “When the Fresh & Easy franchise has consistently failed to meet its established benchmarks there has to be an accounting.
“Particularly when there are outstanding questions regarding the board Remuneration Committee’s independence from management, the excessive compensation granted to Tim Mason despite such obvious performance failures is an embarrassment and should be rejected by shareholders,” Patterson added.
Despite this, Tesco said its approach to executive pay has always been based on “rewarding good long-term performance” and that it has just recorded “another record year of sales and profits” and a 26th consecutive year of increased dividends paid to shareholders.
“We achieved this against the backdrop of very difficult economic conditions in many of our markets,” a spokesperson for the retailer said.
“Rewards are set against stretching business targets and are reduced where such targets are not met. Everybody at Tesco also shares in the success of the business through staff share schemes, which this year paid out more than GBP105m. Other proxy reports have been supportive. We will continue to discuss remuneration and other issues with shareholders in the run up to the AGM next month.”
