David Prosser: Tesco offers hope to rebel shareholders everywhere else
Wednesday 01 June 2011
Outlook For those who regard the scale of the rewards paid to its executives as excessive, Tesco's insistence that "every little helps" is not likely to play any better for yesterday's revamp of its remuneration policy. This, after all, is a company that handed even its lowest-paid director more than £1.7m last year.
Still, for those who worry more about the structure of pay than matters of quantum – probably most of the 47 per cent of shareholders who refused to back its remuneration report last year – the reforms the grocer is making will be welcome.
Essentially, they are an attempt to more closely align executive pay with the long-term performance of the company. Shifting the balance away from basic pay in favour of rewards linked to metrics such as return on capital employed is the right way to incentivise senior managers. The new scheme is also more transparent than the hotch-potch of arrangements it replaces.
There are a couple of quibbles. Tesco is seeking to raise the size of the bonus it is able to pay its chief executive, despite the substantial incentives already available. And while the abandonment of the link between the pay of Tim Mason, Tesco's man in the US, and the grocer's performance there is partly a recognition of investors' disquiet about what Mr Mason has been paid in the past, there is surely some merit in having an explicit relationship between the results achieved by what is a struggling division and the rewards offered to the man who runs it.
Still, broadly speaking, Tesco deserves credit for responding positively to last year's revolt. It is also worth pointing out that Tesco has a good record on sharing the spoils with rank and file staff – more than 200,000 staff were last week awarded shares in the company worth £110m. In that sense, Tesco differs from the companies criticised by Manifest, the governance specialist, this week for raising executive pay while failing to reward the rest of the workforce.
The broader point is that Tesco's overhaul is proof that it is not a waste of time for shareholders to make a fuss about pay, as some investors were beginning to think.
Contrast its willingness to listen to the attitude of, for example, the chairmen of Standard Life and Prudential, both of whom last week gave every impression of being supremely unconcerned about the concerns of their shareholders about executive pay.
Tesco may be in the minority so far in accepting criticism in this way, but its reaction will encourage investors to continue to be bolshy. Remuneration committees elsewhere will also take note. Everylittle really does help.
- 2 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 3 Professional big game hunter Ian Gibson crushed to death by elephant during hunt
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
Migrants crossing the Mediterranean: Pope Francis joins calls for EU action on boat refugees
Yemen crisis: Meet the child soldiers who have forsaken books for Kalashnikovs
Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
Rarest Beanie Baby of them all could be sold for £62,500 on eBay
Isis in Afghanistan: Group claims responsibility for Jalalabad suicide bombing that killed 35
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...