Sir Terry Leahy, one of Britain’s most celebrated businessmen, has been criticised by the man who appointed him as Tesco’s chief executive in 1997.
Lord MacLaurin, the former Tesco chairman and chief executive, said he was saddened by the legacy Sir Terry – who spent more than 13 years as chief executive – had left at the company, particularly its failed foray into the US market.
Tesco confirmed in April that it would exit its loss-making Fresh & Easy business in the country at the same time as it posted a 50 per cent fall in annual profits, the first drop in 20 years.
“When you judge his legacy, it’s very sad,” Lord MacLaurin said from the audience of the group’s annual meeting yesterday. “This company is not going to be fixed overnight. It is a two- or three-year job and I urge you [current chairman Sir Richard Broadbent] to give [Sir Terry’s successor] Philip Clarke and his team time to do this.”
Lord MacLaurin’s comments are significant because of his role in establishing Tesco as Britain’s largest retailer. Having joined as a trainee in 1959, he became managing director in 1973 and chairman in 1985 before retiring in 1997.
Knighted in 2002, Sir Terry was celebrated for building Tesco’s overseas business in areas such as Asia, although Fresh & Easy has undoubtedly damaged his reputation.
Tesco’s board of directors was asked by one investor what it had learned from its failure.
The current chairman Sir Richard Broadbent said: “It’s a good idea to pilot your ideas before you roll them out on a large scale. We must also be open to changing our mind. There must also be more open dialogue between non-executive and executive directors.”
After a torrid few months, which have also seen Tesco tainted by the horsemeat scandal, Sir Richard pleaded with investors to forget sales figures and trust the company to do the right thing.
“The value of the business in which you hold shares is related to our success in putting the customer first,” he said. “This means tracking indicators of customer satisfaction. And it means understanding that giving primacy to quarterly like-for-like sales does not equate to long-term value creation.
“It has also been a year of transition in our management team. That is not unusual in a business where the existing team had been in place for many years, and Tesco is fortunate in having a large pool of talent to draw on from around the world.”
Tesco’s remuneration report was backed by 95 per cent of shareholders despite anger about pay-offs to two directors. Tim Mason, who ran Fresh & Easy, received £1.68m. Former UK boss Richard Brasher got £1.3m.
The company was however greeted by a handful of demonstrators outside London’s Queen Elizabeth II Conference Centre, protesting at Tesco’s sale of lads’ mags.
Sir Richard said he had recently bought a copy of a lads’ mag to see what the fuss was all about, and had been taken aback at its content.
“We’re willing to look at possible changes,” he added.
Rounding up, Mr Clarke – who was battling a heavy cold – also pleaded for patience. Last month, it emerged that he would not receive a bonus for the second year running because of Tesco’s difficulties.
“We are building the next generation of Tesco with our new executive team. Our team is now full of innovators who are connected to the real world,” he said.
“The retail world of tomorrow is going to be very difficult from the one we see today. It will take time, and the proof of the pudding will be in the eating. However, we are seeing improvements and things will continue to get better.”