The chief executive of Tesco, Sir Terry Leahy, had his total remuneration trimmed by 7 per cent last year, as the world's third-largest retailer failed to meet performance targets at its fledging grocery operation in the US.
Sir Terry's lucrative package for the financial year just ended was cut to £5.1m, down from £5.47m the previous year, as he received less than half of the his maximum bonus in deferred shares, largely because of the slower opening programme of its Fresh & Easy convenience stores in California, Nevada and Arizona.
The decision by Tesco – which delivered record pre-tax profits of more than £3bn in 2008-9 – to cut his bonus comes at a time when boardroom pay is under the spotlight like never before.
For the 53 weeks to 28 February 2009, Sir Terry pocketed a salary of £1.36m, as well as total performance-related bonuses of £3.66m, according to its annual report published yesterday. He could pocket about £11.5m in long-term share bonuses if Tesco hits its US and international targets.
The grocery giant launched Fresh & Easy to a fanfare in November 2007 and, at the time, vowed to have about 200 stores by the end of February 2009. But the savage economic downturn in the US – particularly in cities such as Las Vegas and Phoenix, which have been battered by the housing collapse – has caused it to throttle back on its expansion programme, leaving Fresh & Easy with just 115 shops currently. It plans to open about 60 stores this year.
The number of stores was one of the "US-specific" development target missed by Tesco, which meant that Sir Terry only received 45 per cent of the maximum for the deferred shares element of his annual bonus.
A Tesco spokesman said: "It is a good bonus, but in relation to the US there have been some adjustments because we have not hit all the targets out there." However, Tesco said it had made progress on US-specific targets on measures, including sales growth, cost management and customer service in the US. Tim Mason, the chief executive of Fresh & Easy, was also only awarded 45 per cent of his potential maximum bonus.
In April, Tesco said its initial trading losses in US were higher than expected at £142m and it expects a similar loss this financial year. After its record-breaking year, Tesco said that more than 207,000 of its staff will share a bonus pot of £98m.