Tesco faced rebellion over the pay and bonus packages it allocates to directors at its annual general meeting today with over 37% voting against the approval of the grocer’s remuneration report.
As the majority of shareholders – 62.4% - voted in favour, the resolution was passed, but chairman David Reid had to defend its pay rewards scheme.
He told shareholders: “We take a sensible approach to remuneration and it is linked to good performance and you’ll see from our results we’ve had a remarkable year.”
Several shareholders had already expressed concern about the pay of Tesco’s directors in the run up to the meeting. Tim Mason, boss of the US business Fresh & Easy, was singled out in particular for receiving £4m plus bonuses despite the US operation still haemorrhaging losses.
Reid said: “When we start up businesses in almost every country there will be losses for the first few years. We’re putting in expensive infrastructure and focusing on the customer and then with more stores we will move to break even. It’s a good long term business.
“This is a critical stage for the US business model and it’s absolutely appropriate that the team receives not only the basic incentives, but the incentives for driving that business model.”
Despite the haranguing, all the board executives were re-elected with majorities in excess of 90%.
Similar rebellion is expected at Marks & Spencer’s AGM on July 14 over the £15m pay packet of new chief executive Marc Bolland.
Reid also said that the note written by bank Citigroup, which claimed that Tesco’s accounting policies are different to that of its competitors, contains “serious inaccuracies” and that its finance director Laurie McIlwee is “taking it up with the bank”.
Tesco was also questioned once again on why it doesn’t work with the union in the US with its Fresh & Easy shops. A spokesman claiming to act for US shareholders asked why Tesco didn’t engage in conversation with the unions, and claimed that Tesco’s poor performance in the US is related to not working with the union.
Tesco chief executive Sir Terry Leahy said: “Tesco has many successful partnerships with unions around the world, so is not in principle against unions. The key test which is understood very well in the UK with USDAW is that working conditions improve if a business does well.
“Your union [in the US] has opposed us from day one, and has gone on opposing us, and that is not the basis for a partnership. And we have a good business [in the US] with motivated staff, who don’t want to be part of your union.”
When pushed further by the union representative, Leahy gave short shrift, and said: “All we asked was that you give us a chance, and you singularly failed to do that from day one and continue to do that. If you want a better relationship, start by behaving reasonably and then we can build on it. We will be watching what you do, not just what you say.”
Some 100% of shareholders voted in favour of declaring a final dividend.
Among the usual random questions which this year included water shortages at a disabled toilet at a shop in London, whether the AGM could start at a later time in the day, and whether American entrepreneur shareholder Warren Buffett wanted to a seat on the board, Reid also thanked Leahy for his service to Tesco.
Leahy said it had been a “privilege” to lead Tesco and that “it is the best job in the world”. He said of Phil Clarke, who will step into his shoes in March: “He’s an outstanding retailer, a great leader, and is Tesco through and through.”