Shareholders vent anger over £1m payouts for Tesco directors

Disgruntled investors in Tesco dealt Terry Leahy, the chief executive, and three other executives an embarrassing blow at yesterday's annual meeting with a hefty number refusing to back their bid for re-election to the board.

Mr Leahy, who is due to receive his knighthood next month, sat grim-faced as he listened to a string of shareholders condemn the size of his pay while others criticised the length of notice in his and other directors' contracts.

Mr Leahy, the commercial and trading director John Gildersleeve, the marketing and e-commerce director Tim Mason and the retail director David Potts were all retiring by rotation and standing for re-election ­ usually a formality for board members at AGMs.

The re-appointment of the directors was carried on a show of hands, but the chairman John Gardiner revealed 17.1 per cent of the proxy votes did not support the resolutions proposing their re-election. Of the 3.5 billion votes cast there were 450 million abstentions and 150 million votes against. Each share carries the right to one vote.

Before the meeting the National Association of Pension Funds called on investors to abstain from the vote because the four executives are employed on two-year rolling contracts. Guidelines on best practice in corporate governance call for one-year contracts. Mr Gardiner defended Tesco's remuneration policy that awarded Mr Leahy £2.46m in the year to March ­ double the previous year ­ while seven other directors received more than £1m each.

One shareholder said: "I am aghast at the level of remuneration that the board has awarded itself. For eight executive directors to receive greater than £1m each is possibly worth of an entry in the Guinness Book of Records under the heading 'Executive Excess'."

He pointed out that although earnings increased, Tesco's total shareholder return declined by 2.7 per cent last year. Another investor shouted "they're all overpaid the bleeding lot of them" before walking out of the lively meeting that encompassed topics as diverse as Christmas cake, seaweed, the morning after pill and political donations.

Mr Gardiner said the directors were required to invest a large part of their bonuses in Tesco shares "to make sure the executive team's interests square with yours, the shareholders". He also revealed that like-for-like sales at Tesco's UK supermarkets rose by 4.5 per cent in the 12 weeks to 18 May, compared with an average of 6.2 per cent for the previous year.

Analysts said the figure was little surprise as Tesco had warned the rapid growth seen last year would fall to more normal levels.