James Moore: Tesco's golden goodbyes leave the firm with yet more egg on its face

 

Outlook Did you know that you have 29 options for buying eggs from Tesco? Grade, size, colour (brown/white) or number in the box, it doesn’t matter much if the egg is all over your face. Like it is over Tesco’s. Again.

The grocer’s embarrassment has been caused by the fact that, after a brief imbroglio, it’s kicking £1.22m to  former chief executive Phil Clarke and another £971,000 to his former finance director, Laurie McIlwee, in the form of golden goodbyes.

Golden goodbyes described by Tesco as “liquidated damages contractually”. That sounds almost like something you might find down the aisle containing the cleaning products. On three for two with 50 extra club card points thrown in.

Cleaning, of course, is what Mr Clarke’s successor Dave Lewis is having to do. If only his colleagues on the remuneration committee could have brushed the liquidated damages contractually under the carpet for him while he was showing his shiny new strategy off to the City.

Messrs Clarke and McIlwee are contractually entitled to the money. Being bad at their jobs, and they surely were that, is no impediment to their getting paid (off) under the contracts they were handed.

Tesco’s board was probably well aware that it was on thin ice when it suspended the payments. It may also have known that the accounting shenanigans that forced the company to restate its profits and left it with the Serious Fraud Office at its door, happened at a level below the top two.

Messrs Clarke and McIlwee were responsible only for overseeing the culture that allowed it to happen. In that they’re remarkably similar to the banking executives who presided over the Libor and Forex-fixing scandals but were able to tell MPs they didn’t know what was going on under their own noses.

They also (mostly) got paid because you can’t legally describe that as gross misconduct.

Tesco’s suspension of their payoffs was a charade, an attempt to be seen as playing hardball on behalf of shareholders while wearing the Emperor’s New Clothes.

The question we should be asking is how it got to this position in the first place. How Tesco, and so many other companies, have allowed bad executives to build big fortunes on the backs of their staff and shareholders.

When a new man at the top of a big public company is hired, they are typically held up as a special “talent” for which there is an internationally competitive market. The company, therefore, says it is required to hand out more sweeties than you could stack up at 1,000 checkouts just to keep the “talent” from bolting. One of those sweeties is usually the guarantee of a year’s salary should it turn out that they are, in fact, a mere mortal.

Mr Lewis, unlike Mr Clarke, may prove to be an exception. The City certainly thinks he is, and the shares are flying. But even if he’s not, even if the grocer’s mini revival proves to be a mirage, he’ll depart with handsome nest egg and an even bigger golden goodbye than the one handed to Mr Clarke. And the cycle will continue.

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