Friday, July 2, 2010

Tesco's Director Remuneration Report Approved at Today's AGM; But 47% of Shareholders Voice Opposition to Director Pay Packages

Breaking Buzz: From the 2010 Tesco Annual General Meeting (AGM)

Tesco shareholders approved the company's Directors' Rumuneration Report at today's 2010 Annual General Meeting (AGM) in London, as we predicted would be the case in this story yesterday - July 1, 2010: A Preview of Tomorrow's (July 2, 2010) Tesco Annual General Meeting.

However, shareholder opposition over the directors' 2009 compensation, based largely on displeasure over the $6.188 million 2009 pay package [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] awarded to Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason (pictured below), was significant. In fact, it was the most serious shareholder rebuke to a UK public company in terms of a directors' compensation report so far this year, according to London financial analysts in the City (Britain's version of Wall Street).

A whopping 38% of Tesco shareholders voted against approval of the Remuneration Report today. The report is the compensation for Tesco senior executives, such as CEO Terry Leahy and Tim Mason, who also serve on the company's board of directors.

In addition, another 9% of shareholders abstained from voting on the directors' pay package report at today's AGM.

This means 47% of Tesco shareholders didn't vote in favor of approving the 2009 salary, bonus and stock option compensation for the company's senior executives, who also are on the board.

According to UK law, abstaining isn't counted as a vote against such a report. However, the 9% clearly were voicing their collective displeasure with the directors' compensation, particularly Mr. Mason's, or else they would have joined the majority and voted to approve the Remuneration Report.

Here's how the vote went down today:

To approve the Directors’ Remuneration Report

>Votes For approval: 4,447,633,386 >Votes against approval: 290,095,895

>Votes Withheld - Abstain: 61,615,144

>Total Votes: 4,799,344,425

[Read a recap of this and all the other votes taken at today's Tesco AGM here.]

Combined, this means 47%, nearly half, of Tesco shareholders aren't in favor of what the global retailer paid its directors in 2009. It's the first time in modern history we can recall a Tesco Remuneration Report getting such a negative vote. The vote, combined with some other recent criticisms of its executive compensation, should serve as a cautionary note to Tesco's board.

Clearly Tesco Fresh & Easy Neighborhood Market CEO Tim Mason's pay package was the primary source of the shareholder rebellion today. [Read: July 1, 2010: A Preview of Tomorrow's (July 2, 2010) Tesco Annual General Meeting. Also see the stories linked at the end of this post.] In fact, his 2009 compensation package was one of the two key topics of conversation and discussion at today's AGM. The other being topic being the March 2011 retirement of Tesco CEO Terry Leahy.

As we've been reporting on and writing about for a while now, the CtW Investment Group, which works with the Change to Win coalition of U.S. labor unions., including the United Food & Commercial Workers (UFCW) union, as an investment partner, on June 17, 2010 launched a campaign to get Tesco shareholders to vote against the Remuneration Report. Although not successful in terms of getting a majority 'no' vote, the campaign was successful in that it obtained more 'no' and withheld votes than most anybody thought it would. The campaign, and today's vote, also elevated the issue of Tesco director compensation, particularly Mr. Mason's, in a major way.

The CtW Investment Group campaign isn't over.

Below is what CtW Investment Group director of value strategies Michael Garland said in a news release distributed shortly after today's vote on the Remuneration Report was over:

Tesco Shareholders Deliver Stinging Rebuke to Board Over Pay at Today's AGM

In a stinging rebuke to the Tesco PLC (LON: TSCO) board of directors, shareholders today cast 38% of their votes against the Directors' Remuneration Report at the company's Annual General Meeting in London, based on preliminary results released by the company. The company did not disclose the additional number of shares withheld on the Report.

"The extraordinary opposition vote reflects investor outrage over the excessive pay awarded to Tim Mason, Tesco's second highest paid executive, despite the dismal performance of the U.S. Fresh and Easy business he oversees," said Michael Garland, Director of Value Strategies for the CtW Investment Group, which had urged shareholders to oppose the remuneration report.

Today's repudiation of Tesco's executive compensation comes at a difficult moment for the Tesco board. In addition to anger over Mr. Mason's pay, directors must also confront mounting investor concerns with the aggressiveness of the company's accounting, the transparency of its U.S. performance and pay disclosures, and the long-term viability of its U.S. business.

"The onus is now on the board not only to restore the link between pay and U.S. performance for Mr. Mason, but also to address the underlying concerns with Fresh & Easy's future viability," Mr. Garland said. "As an immediate first step, the board needs to disclose metrics and targets that will allow shareholders to evaluate the performance of Fresh and Easy and its executive management going forward."

The CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win, a coalition of U.S. unions representing nearly six million members. These funds have over $200 billion in assets and are substantial long-term Tesco shareholders.

Tesco hasn't issued a news release of its own on the vote. However, at the AGM it defended the compensation packages of all the directors, including Tim Mason's $6.188 million package.

Regarding Tesco director and Fresh & Easy CEO Mason, a Tesco spokesmen said: "Tim's compensation isn't based on the performance of Fresh & Easy. Rather, it's based on various criteria like the look of the stores and customer response."

Look for our upcoming analysis/commentary piece - "Fireworks at the 2010 Tesco AGM" - on July 5th.

Recent, Related posts

July 1, 2010:A Preview of Tomorrow's (July 2, 2010) Tesco Annual General Meeting

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'


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.

[Photo Credit: Tim Mason; - Fresh & Easy Neighborhood Market.]

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