Shareholder power at Tesco

On the day after a survey revealed that the median pay of FTSE 100 chief executives rose by 32% £3.5m, it is interesting to find Tesco taking the opposite approach. In response to pressure from their shareholders over the pay and bonuses of their top people last year,Tesco claims that it ischallenging fat cat pay excess with scrapping of their controversial incentive scheme.

Although the new scheme will offer broadly the same potential rewards, it will be based on share awards in response to executive performance, rather than simply giving board members share options. Don’t feel too sorry for Tesco executives - although new boss Phil Clarke will receive a base salary of £1.1 million, down from the E£1.4 million received by his predecessor Terry Leahy, he can earn an annual long-term bonus of up to 275%, and a further 250% through a short-term bonus. Tesco say this is a simplification of their previous schemes, and it is brought about because 47 percent of shareholders either voted against or abstained in a vote over executive pay last July. It is rare to find such a clear example of shareholder power as the owners of a business exercise their right to have a say in the pay of the directors they employ, so is worth noting.

Reports here from The Guardian and Reuters.

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