Tesco facing investor revolt over pay rules after departing boss is handed a controversial bonus boost
Tesco is facing an investor revolt over a controversial decision to change its pay rules and hand outgoing boss Dave Lewis a bumper £6.4million package.
The supermarket group boosted the chief executive’s bonus by removing Ocado, the online groceries firm, from its ‘peer group’ in performance measures.
Tesco compares its performance against rivals. If it is ahead, Lewis gets paid more. But Ocado has performed well during lockdown, out-gunning Tesco.
‘Poor practice’: Tesco boosted its chief executive Dave Lewis’s bonus by removing Ocado, the online groceries firm, from its ‘peer group’ in performance measures
So by dropping its online rival, Tesco looks better. But bosses now face the embarrassing prospect of a slapdown at the AGM next week from shareholders who are angered by the move.
Ahead of the company’s annual general meeting on Friday, investors are being urged to vote against the pay report by influential shareholder advisory services ISS and Glass Lewis. ISS branded Tesco’s change of rules ‘poor practice’ and said no ‘compelling reason’ had been given.
And with the vote just days away, a ‘large number’ of investors are said to be ready to vote against the company, Sky News reported.
Lewis, 55, received £6.4million overall for the 2019-20 financial year, the highest annual pay packet at the grocer since Sir Terry Leahy’s exit in 2011.
But the package sparked controversy after it emerged that Tesco had made a last-minute change to performance measures, causing Lewis – who will leave this summer – to get a bigger bonus.
When online supermarket Ocado was removed from the company’s ‘peers’, Tesco was deemed to have outperformed rivals by 3.3 per cent – compared to an underperformance of 4.2 per cent if Ocado had been included.
Tesco’s pay committee decided Ocado was no longer a peer due to its focus on the sale of its robotic warehouses and technology.
ICommittee chairman Steve Golsby said: ‘As Ocado has seen a significant shift away from being a retail-focused business towards a technology-focused business, the committee decided to remove Ocado from the benchmark.’
The change meant Lewis’ long-term bonus increased by £1.6million to £2.4million. In total, his bumper payday brought his earnings since 2014 to a staggering £29million.