Tesco faces investor revolt over pay rules after boss leaves controversial bonus
Tesco is facing an investor revolt following a controversial decision to change its compensation rules and give outgoing boss Dave Lewis a lump sum of £ 6.4 million.
The supermarket group increased the CEO’s bonus by removing the online grocery company Ocado from its “peer group” in performance measures.
Tesco compares its performance to that of its competitors. If he is early, Lewis is paid better. But Ocado performed well during the lockout, overtaking Tesco.
‘Bad practice’: Tesco increased CEO Dave Lewis’ bonus by removing online grocery company Ocado from its’ peer group ‘in performance metrics
So, by abandoning its online rival, Tesco looks better. But the bosses are now faced with the embarrassing prospect of a termination at the AGM next week from shareholders who are angry at this decision.
On Friday, before the company’s annual general meeting, investors are invited to vote against the compensation report for influential shareholder advisory services ISS and Glass Lewis. The ISS called the Tesco rule change “bad practice” and said no “compelling reason” was given.
And with the vote in a few days, “a large number” of investors would be ready to vote against the company, Sky News reported.
Lewis, 55, received a total of £ 6.4 million in FY 2019-20, the grocer’s highest annual salary level since Sir Terry Leahy’s exit in 2011.
But the package sparked controversy after it appeared that Tesco had made a last-minute change to performance measures, which allowed Lewis – who will be leaving this summer – to get a bigger bonus.
When the online supermarket Ocado was removed from the company’s “peers”, Tesco was said to have outperformed its competitors by 3.3% – compared to 4.2% underperformance if Ocado had been included.
Tesco’s compensation committee decided that Ocado was no longer a peer because of its focus on selling its robotic warehouses and its technology.
Committee Chair Steve Golsby said, “As Ocado has seen a significant change from a retail business to a technology business, the committee has decided to remove Ocado from the benchmark.”
The change means that Lewis’ long-term bonus has increased from £ 1.6 million to £ 2.4 million. In total, his record salary has brought his revenues since 2014 to a staggering £ 29 million.