Thursday, July 1, 2010

A Preview of Tomorrow's (July 2, 2010) Tesco Annual General Meeting

The Sun never sets over the Tesco Flag in the United Kingdom: Tesco is the leading retailer of food, groceries and general merchandise/non-foods by a huge margin in the UK. The retailer has at least one store - and multiples in most cases - in every single city, town and village in the country. Tesco has a commanding 31% share of the food and grocery market in the UK. By way of comparison, Tesco's two leading rivals, Walmart's Asda and Sainsbury's, combined have about the same percentage of market share.

Tomorrow (July 2) at 10:30 am (London Time) United Kingdom-based Tesco, which owns and operates 159-store Fresh & Easy Neighborhood Market USA, as well as being the third-largest global food and grocery retailer, holds its 2010 Annual General (shareholder) Meeting in London UK.

You can read an explanation of the AGM, along with the agenda for tomorrow's 2010 shareholders' meeting here. It's a full agenda.

We will be following closely numerous developments during tomorrow's AGM. But below are some particular topics/issues we'll be paying close attention to. The first one is more thematic in that it will color the entire texture and contour of tomorrow's meeting. The others are specific developments and issues.

>Sir Terry's swan song: This year's Tesco AGM will be unlike the previous 14, in that it's the last annual shareholders' meeting for Tesco CEO Terry Leahy - at least as CEO - who is retiring from the leadership position at the global retail giant on March 11, 2011. Leahy will likely remain an investor in Tesco, so he could attend future AGM's in that capacity. [June 8, 2010: Tesco CEO Terry Leahy Retiring; Philip Clarke New CEO; Tim Mason Named Deputy CEO But Will Remain Fresh & Easy Neighborhood Market Chief in U.S.]

Tesco's fiscal year ends in late February 2011. But when the 2011 AGM rolls around at about this time next year Sir Terry, who received that honor from the Queen while CEO of Tesco, will be gone, replaced by the company's international operations head and IT chief Philip Clarke.

Additionally, Leahy isn't going to be taking a position as a non-executive member of Tesco's board once he retires, as many thought he might. As such, when he leaves in early March 2011, his will be a full departure from the retail company he's led for the last 14 years, and worked at for twice that long.

Expect to see a outpouring of praise for Sir Terry at tomorrow's AGM, his last. Also expect to see numerous stories in the British press in the same vein following the end of tomorrow's meeting.

Leahy deserves most of the praise he will receive. In his tenure as CEO he's led Tesco to world class retailing status.

His one fumble, at least thus far, has been Fresh & Easy Neighborhood Market USA. But F&E is still young. And launching a food and grocery retailing start up - although the start up phase is nearly over - in a mature market like the U.S. isn't an easy task. And it took guts to do. As we've said frequently in Fresh & Easy Buzz, don't underestimate Tesco's ability to right a less than seaworthy retail ship. Although in the case of Fresh & Easy, it will be up to incoming CEO Philip Clarke to make the decisions required to achieve that objective. Sir Terry will be handing off a less than fully-outfitted ship - Fresh & Easy USA - to Clarke in March 2011. Or perhaps the ship will look much different by then? Read what our 'The Insider' columnist thinks about that here and here.

>Northern California: We reported in this June 26, 2010 story - Tesco Planning to Announce in July When First Northern California Fresh & Easy Neighborhood Market Stores to Open - that Tesco will be making an announcement about its plans for Northern California in July. [Also see here.] Such an announcement could come as early as at tomorrow's 2010 AGM. Stay tuned.

>Acquisitions: In the U.S. and elsewhere. Our 'The Insider' columnist discussed the U.S. acquisition topic in his column published earlier this week. [June 27 The Insider: Will Tesco Acquire Supervalu, Inc. and Change its 'Fresh & Easy' Game in America?] 'The Insider' says he isn't expecting such an announcement at tomorrow's meeting. But "never say never," he told us this morning when asked for a comment. He also said this morning he's working on a follow-up column, in which he discusses a regional acquisition scenario for Tesco, which inlcudes Supervalu's Albertsons chain in Southern California, along with some other information.

>Executive-director compensation: On June 29 the CtW Investment Group and the Change to Win coalition of U.S. labor unions - including the United Food & Commercial Workers (UFCW) union, which CtW invests pension fund money for, took its campaign to get Tesco shareholders to vote against approval of the company's remuneration package (the pay package for the senior executives who are also on the board) to the next level.

On June 29 CtW sent a letter to Patrick Cescau, the senior independent (not employed by Tesco) director on the company's board, calling on him "as incoming Senior Independent Director, personally to step forward at Tesco’s Annual General Meeting this Friday to describe the steps the board of directors is taking to exercise independent oversight of Fresh & Easy and restore the link between pay and performance for its chief executive, Tim Mason." You can read the entire letter here.

Cescau has been a non-executive director of Tesco since February 2009. He was formerly a group chief executive of consumer package goods giant Unilever from 2005 to 2009. Prior to that he was chairman of Unilever plc and vice chairman of Unilever NV. He joined Unilever in 1973 and became finance director of Unilever Indonesia in 1986, then led the business in Portugal, before returning to Indonesia as Chairman/CEO in 1991.

Cescau also ran Unilever's Van den Bergh Foods and Lipton beverage and foods businesses in the US from 1995 to 1998, before becoming Group Finance Director in 1999 and Foods Director in 2001. He has been a non-executive Director of Pearson plc since 2002 and a director of INSEAD (the European school of management) since 2009.

For those not aware, Unilever is one of Tesco's biggest and closest supplier partners, particularly in the United Kingdom but also globally.

The June 29 letter to incoming director Cescau is a follow up to a June 17 letter to Tesco shareholders in which CtW Investment Group urged them to vote against proxy item #2, the Directors Remuneration Report, at tomorrow's AGM. You can read the June 17, 2010 letter to Tesco shareholders here.

We recently said here and here that despite the efforts and campaign by the CtW Investment Group and the Change to Win coalition to obtain a no vote from shareholders, the executive-director pay package resolution, which approves the compensation already given to the Tesco executives-board members, should past tomorrow without much difficulty.

Why? The Tesco shareholders that have the votes, are the big, institutional investors. They aren't likely to vote against the resolution to approve the remuneration report for two reasons: (1) Tesco reported record profits for its most recent fiscal year, and (2) voting it down would cause uncertainty in the market, something these big investors do not want to create. That uncertainty would likely cause a drop in Tesco's share price - which isn't something most of these institutional investors want to see happen. Tesco also had a good first quarter in the new fiscal year, which it reported in an interm report on June 15, 2010 here.

See our stories linked below as well, as they appear to have helped shape this issue:

June 4, 2010 Every Little (Bit) Helps: Tesco Fresh & Easy Neighborhood Market CEO Mason Paid $6.188 Million For 2009

June 23, 2010: Tesco Fresh & Easy Neighborhood Market CEO Tim Mason Gets Big Stock Award Featuring a Singular Twist

June 24, 2010: Warren Buffett Strikes Again: Buys 2 Million More Shares of Tesco Stock For 3.2% Ownership Stake

June 21, 2010: The Missing Link in Tesco's Purchase of Fresh & Easy Neighborhood Market Meat Supplier '2 Sisters Food Group'

Fresh & Easy Buzz has learned Bill Dempsey, the director of the United Food & Commercial Workers (UFCW) Capital Stewardship Program and a founding member of the CtW Investment Group, will be attending tomorrow's Tesco AGM in London, which should add an additional personal touch to the group's campaign to get shareholders to vote no on the executive-director pay package resolution.

Through its pension fund the UFCW is an investor in Tesco. CtW is its investment advisor and partner. Tesco's Fresh & Easy Neighborhood Market, which currently has 159 stores in California, Nevada and Arizona, is a non-union grocer. Tesco in the UK, however, is union-affiliated.

The UFCW has been attending Tesco AGM's for the previous two years. Below are some past stories on those annual meetings and related issues.

June 4, 2008: News and Analysis: UFCW Union Takes its Tesco Union Organizing Campaign Across the Pond to the United Kingdom Beginning Today

June 26, 2008: Tesco 2008 AGM: Charges of Tesco's Exploiting Workers at Indian Factory Heat Up On the Eve of Corporate Annual General Meeting

June 22, 2008: Vocal Cast of Critics and Advocacy Groups to Attend Tesco's Annual General Meeting On Friday, June 27

June 26, 2008: Tesco 2008 AGM: Barack Obama Sends Second Letter to Tesco CEO Requesting the Company Meet With U.S. UFCW Union Leaders About Fresh & Easy

August 5, 2008: UNI Global Union Launches Tesco-Specific Alliance; Calls For Tesco Executives to Meet With UFCW Union Officials Over Fresh & Easy Neighborhood Market

February 11, 2008: Supermarket Union President Asks Britain's Prince Andrew to Arrange A 'Sit-Down' With Tesco Fresh & Easy Neighborhood Market Senior Executives

Also: click here, here, and here for additional posts. Use the "newer" and "older" posts links at the bottom of the pages to obtain more stories.

Tomorrow's meeting is packed full of topics and discussion. Fresh & Easy Buzz will be focusing on all of it, with a particularly wide-open set of eyes and ears poised on the topics and issues highlighted here.

No comments: