Tesco bonus delivers £3m pay package for Leahy

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The Independent Online

Sir Terry Leahy, the chief executive of Tesco, saw his pay package hit £3m last year - just part of the £200m the supermarket group paid out to its staff in shares and bonuses.

Sir Terry Leahy, the chief executive of Tesco, saw his pay package hit £3m last year - just part of the £200m the supermarket group paid out to its staff in shares and bonuses.

The group, which controls 27 per cent of the UK's grocery market, paid its board of directors £11m in bonuses, according to its annual report and accounts.

A £2m bonus helped Sir Terry to triple his £955,000 basic salary to £2.98m last year, 5 per cent more than he received in 2002. He is line for an annual pension of £433,000, the report revealed.

David Reid, who swapped his executive chairman seat for a non-executive role in January, was paid a total of £2.7m, including £1.9m in short and long-term share awards, up from £2.6m the previous year. Mr Reid's base salary, which was £691,000 last year, will fall this year "in line with Tesco's other non-executive directors", a company spokeswoman said. He is in line for an annual pension of £409,000.

Tesco confirmed yesterday that it had bowed to shareholder pressure and reduced its executive directors' contracts to 12 months from 24 months. But it said it would keep 24-month contracts for any new recruits. After their "initial period of appointment", even new executive directors' notice periods would revert to 12 months, it added.

The influential National Association of Pension Funds welcomed the group's climbdown on the length of its directors' contracts, which attracted a storm of protest from small shareholders at last year's annual meeting. A NAPF spokesman said that under "exceptional circumstances" the lobby group could tolerate the use of 24-month contracts to lure external talent. Tesco's total remuneration bill for its board of directors rose 10 per cent last year to £16.9m. The group, which takes one in every eight pounds spent on the high street, unveiled record profits for a UK retailer last month. Its pre-tax profits soared 17.6 per cent to £1.6bn after it expanded its share of the global food market.

The group is planning to hire 20,000 new staff this year as it opens more than 100 stores around the world. Mr Reid said this would "deliver even better service to our customers".

The company is changing its short and long-term incentive scheme in a move that could enable its directors to receive up to 250 per cent of their salary as a bonus. A maximum of 100 per cent will be paid in cash; 75 per cent will be paid in shares that directors will have to keep for three years; and the final 75 per cent will be tied to how much the group grows its earnings per share.

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