TESCO bosses emerged unscathed after shareholders approved their pay plans despite growing concern over the supermarket’s loss-making US business.
Nearly 97% of shareholder votes were made in favour of the retail giant’s remuneration report at its annual general meeting in Cardiff, despite claims its pay policy had the potential to be wholly excessive.
Questions over pay had been raised ahead of the meeting by shareholder body Pirc, in spite of Tesco chief executive Philip Clarke’s decision to forgo a £372,000 bonus in the wake of the group’s first profits warning in more than 20 years.
But Tesco came under pressure over its US venture Fresh & Easy, which has failed to turn a profit since launching in 2007.
Change to Win (CtW) – an investor group that works with US union- sponsored pension fund – has demanded an urgent evaluation of the division.
It wanted a committee of non-executive directors to review the future of Fresh & Easy, although its calls were discounted by Tesco on the basis of a vested interest.
Speaking after the meeting, Michael Zucker of CtW said: “We have seen Tesco pull out of Japan. How much time can they continue to lose money in the US before they have to do the same there? What people want is greater transparency.”
Tesco stood by its US business, with Mr Clarke saying Fresh & Easy had posted reduced losses for the first time and that the company was on a path to sustainability.
But one investor said: “Vision is not enough, execution is the key.”
Around 200 shareholders turned out to Tesco’s AGM, which was held this year in Cardiff’s City Hall.
The group was in the spotlight over its pay plans and performance before the AGM, with Pirc claiming that combined pay – including historic awards that vested and were exercised in the year – exceeded 300% of executives’ salaries.
And while Clarke waived his bonus, the group’s annual report revealed he still earned a £1.6m salary in the last financial year.
But Tesco chairman Sir Richard Broadbent said: “How businesses reward its executives has been a prominent issue.
“However, our shop-floor employees shared a £110m bonus, this was the same figure as the previous year and recognised their outstanding work during a challenging time.
“Whereas our management team received 16.9% of the maximum bonus they could have received, our most senior directors received 13.5%.”
The group has had a difficult year so far after its shock profits warning in January, when it admitted it messed up its pricing strategy.
Despite a £1bn turnaround programme, the group’s recent sales figures lagged behind that of smaller rival Sainsbury’s.
It also suffered a 1.5% fall in underlying sales in the 13 weeks to May 26, while Sainsbury’s recorded a 1.4% underlying sales rise.
But Clarke, who was appointed to the post last year, insisted the company was well placed to weather the storm and told shareholders that the bigger picture was far from gloomy.
He said Tesco was investing heavily in its UK operations – employing an extra 22,000 staff over the next two years and 400 stores undergoing upgrades.
