Tesco unveils overhaul of executive pay
Tesco unveiled an overhaul of executive pay today after nearly 40% of its shareholders voted against the supermarket giant at its AGM last year.
Under the new scheme, chief executive Philip Clarke could still pick up nearly £7 million in pay and bonuses this year if the company meets all of its targets, but a separate scheme for US boss Tim Mason has been scrapped.
Mr Mason's pay was the subject of criticism at last year's annual meeting, especially from US institutional investors who complained it was excessive given the big losses Tesco's US start-up Fresh & Easy chain is racking up.
Tesco said it is taking a new approach this year after an extensive review and consultation with shareholders.
The plans, revealed in its latest annual report, will see Tesco's current four long-term incentive plans merged into one single plan with bonuses paid out if targets are met on earnings per share and return on capital employed.
There will also be an annual short-term bonus based on six measures which include reducing carbon emissions, employee engagement and new space expansion.
Under the scheme, Mr Clarke, who started his job in March, can earn an annual long-term bonus of up to 275% of his £1.1 million salary and a further 250% through a short-term bonus.
Other executive directors get slightly less in percentage terms under each plan, though Tesco said in exceptional situations it may increase the long-term payout to 350% of salary.
The firm said the new methodology will encourage a focus of "profitably growing the business in an efficient way".
Outgoing chairman David Reid said: "We have designed a new structure which is simpler and more collegiate, with clear financial targets."
Tesco has also increased the number of shares directors must own in Tesco to four times salary for the chief executive and three times for other executives. At present, directors have to hold just the equivalent of one year's salary in Tesco shares.
The annual report revealed that former chief executive Sir Terry Leahy received £4.2 million in the year to February, down from £5.2 million the previous year. This included a cash and share bonus of about £2.7 million and base salary of £1.4 million.
The company's AGM will be held on July 1.
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