Showing posts with label AGM. Show all posts
Showing posts with label AGM. Show all posts

Friday, July 1, 2011

Tesco Shareholders Meet: Board Says Yes to Pay Plan, No to Investigation of Fresh & Easy Neighborhood Market; Pig Farmers Say it's Impossible to Bring Home the Bacon


News/Analysis/Commentary
Tesco's 2011 Annual General Meeting (AGM)

Tesco's annual shareholders' meeting today in Nottingham, England UK, home of the Sheriff of Nottingham of literature fame, went off with precision - and with the exception of a couple interesting diversions was nearly as placid as the countryside surrounding the Midlands' city where it was held.

First up, Tesco's shareholders approved the global retailer's new Remuneration Plan, or pay package for senior executives who also serve on its board, by a whopping 97.2%. In contrast, at last year's annual meeting, 47% of shareholders voted against the Remuneration Plan for 2010.

What a difference a year - and a new pay scheme - makes.

In this story on Wednesday - June 29, 2011: Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market - we said Tesco shareholders - which really means the big institutional investors because that's where most of the votes are - would pass the global retailer's Remuneration Report, approving the new senior executive/board director compensation plan by a healthy majority, although even we were surprised by the whopping 97.2% in favor vote.

In June, Tesco unveiled the new pay plan for its senior executives who also sit on the board, as a way to try to put an end to what many shareholders and others have argued over the years is the controversial way in which the United Kingdom-headquartered global retailer compensates and rewards the executive directors.

The new pay (or remuneration) plan, which Tesco's board says is a simpler, more collegiate and more investor-friendly version compared to the old one, basically removes executive-level stock options from the senior executives-directors' compensation (bonuses and stock on top of base salary) package and replaces them with what Tesco is calling a performance share award.

All the directors performance share awards are based on the total performance of Tesco plc, rather than its individual divisions and the like, which is one of the collegiate aspects of the plan, according to Tesco.

In the new program Tesco also has dumped its four long-term financial incentive plans for the executive directors - which is something some investors and others have called excessive - and replaced them with just one plan.

The old plan also required five different performance measures or metrics to determine success in terms of the bonuses and stock options the executive directors would receive. In contrast, under the new and simplified plan, there are two performance measures: return on capital employed and earnings-per-share.

Additionally, under the old plan Tesco used over 20 performance measures to determine annual bonuses for the senior executives who also sit on the board. That's been chopped down to just seven in the new plan. More simplification.

All the directors will participate in the same plan now (collegiate), unlike under the old scheme, including board member-Tesco group deputy CEO, chief marketing officer and Fresh & Easy Neighborhood Market CEO Tim Mason, who was singled out among the executive directors previously, in that part of his bonus and stock option package was based on the performance of Fresh & Easy USA, which he's been CEO of since 2006.

The package though wasn't based on Fresh & Easy's making a profit or even breaking-even. Instead it was based on certain benchmarks put forth by former CEO Terry Leahy, who retired in March of this year, and approved by Tesco's board.

For example, last year Mason was given a bonus worth about 80% of his annual salary of £832,000 - which is about $1.336 million at today's conversion rate - even though Fresh & Easy had loses about 10% higher than the previous year.

In 2009, Mason took home total compensation of over $6 million, despite huge losses at Fresh & Easy.

In both cases then Tesco CEO Terry Leahy and the board said he earned the pay and bonuses, plus stock options, for hitting certain strategic goals and meeting certain corporate benchmarks and milestones.

From 2006 to last year Mason's only position, in addition to sitting on the board, was CEO of Fresh & Easy. But in March of this year he was named to the added posts of Tesco group deputy CEO and chief marketing officer for Tesco. Therefore, it makes logical sense he should be included along with all the other executives-directors in the compensation scheme, in our analysis. (See our Jun 29 piece linked above and below for more details about that analysis.)

No independent investigation of Fresh & Easy

In our story on Wednesday [Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market] we reported the labor union-affiliated Ctw Investment Group asked new Tesco board member and incoming (November 2011) chairman Richard Broadbent to initiate an objective and independent review of the retailer's El Segundo, California-based Fresh & Easy chain. Broadbent was approved by shareholders as a board member today. He joins the board tomorrow.

In our story linked above, we said the board would not do this now or anytime in the future. Tesco board chair David Reid, who is retiring in November, and the rest of the board did just that, dismissing the request by CtW and another firm, Pirc, saying it would not order such an independent review of Fresh & Easy Neighborhood Market. End of story.

In a statement Tesco's board said: "CtW doesn't own shares and doesn't represent shareholders. Pirc doesn't represent shareholders either. We are very glad that shareholders have endorsed the new Remuneration Plan."

CtW Investment Group manages pension funds for various U.S. labor unions, including the United Food & Commercial Workers (UFCW) union, which have investments in Tesco. It says it's therefore an institutional investor in Tesco, just like the various other fund management firms attending today's meeting. And since CtW was at the meeting, and Tesco only allows investors and the media at the annual shareholders' meeting, it would appear on the face of it the retailer recognizes the investment group as an investor. If not, why was CtW allowed at today's meeting?

A representative of CtW said today he was disappointed by the decision the board made to say no to an independent and objective investigation of Fresh & Easy. But he also said he was far from surprised by the decision.

The union pension fund-affiliated investment group was also at last year's shareholders' meeting, along with the UFCW union. The representatives of CtW and the UFCW were part of some verbal fireworks with then CEO Terry Leahy last year over the compensation issue (particularly as it pertained to Tim Mason), which is something Tesco and new CEO Clarke avoided at this year's shareholders' meeting. Read our story here - July 5, 2010: Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London. It's also good background in general for this piece.

The vast majority of investors at today's meeting were fine with the board's saying no to an independent investigation of Fresh & Easy, although many weren't fine or happy about the 176-store U.S. chain's continued losses, which to date are at about $900 million

CEO Clarke said little - and deputy CEO and Fresh & Easy Neighborhood Market CEO Mason said nothing - about Fresh & Easy at today's meeting, other Clarke's saying Tesco still plans to break even with the grocery chain, which lost about $307 million on sales of about $818 million in the fiscal year end February 26, 2011, by the end of the its 2012/13 fiscal year, which is 20 months from now.

Clark also said he's pleased with Fresh & Easy's "progress," based in part on the four trips he's made to its El Segundo, California-based headquarters offices and Riverside County distribution center campus since February of this year,  saying he believes the chain's on track to break even by February 2013, which is something he's said before a few times since taking over in March as CEO of Tesco.

Mason didn't make a presentation about Fresh & Easy at today's shareholders' meeting, which didn't surprise us but demonstrates how much Tesco wants to downplay its U.S. operation, which has 176 stores in California (127 units), Arizona (28) and Nevada (21), which is hundreds of fewer stores then it originally said it would have open by now.

The first Fresh  Easy stores opened in November 2007. Tesco originally planned to have 500 stores open by now and up to a 1,000 units open by the end of 2013. The plans now call for 300 stores to be open by February 2013.

We said from day one, late 2007 when the blog was started, that those store count number were over the top.

We were right.

And when Philip Clarke took over as CEO of Tesco in March, he said it would take 400 stores to break-even. In April he revised that to 300 stores. Terry Leahy's dream was for Fresh & Easy to be a cash cow for Tesco. Clarke, who inherited the loses at Fresh & Easy from Leahy and Mason, would be pleased as punch to break even.

This year's fireworks: Protesting pig farmers

Tesco's shareholders may have been fairly happy about things overall at today's annual meeting, voting by 97.2% in favor of the Remuneration Plan, as an example. But a group of about 70-80 British pig farmers and supporters protesting outside the conference center in Nottingham where the event was held were "slopping mad."

Struggling to bring home the bacon

The pig farmers and there allies said Tesco is paying them unfair prices for the pork they sell to the retailer, which is the UK's number one grocer, with an about 30% market share, and they want the retailer to pay a more fair price for the locally-raised pigs. Tesco's top two competitors, Walmart-owned Asda and Sainsbury's hold a combined national share of about 34%, to put just how big Tesco is in the UK in perspective.

One of the pig farmers said rising costs for feed are rapidly putting him in a situation in which if Tesco doesn't soon raise the price it pays him for his pork he will be losing money on every pig if he continues selling to the retailer.

A Tesco spokesman said the retailer believes it pays a fair price for the pigs and that Tesco makes a strong effort to support and advertise the locally-produced pork.

But the pig farmers weren't buying this, which is why they were protesting outside the shareholders' meeting, holding signs with various slogans, such as this one: "Tesco - how about the crumbs from your rich man's table?"

The protesting pig farmers received a significant amount of attention from investors and the media today though, perhaps proving that in addition to pork-producing the also know that in public relations as in pig farming the "squeaky" wheel most often not only gets the grease but also its 15 minutes or so in the spotlight.

But Tesco would be wise to sit down with these local pig farmers and try to hash something agreeable out, as the issue has been festering for a very long time in the UK.

Related Stories

June 29, 2011: Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market

May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million
March 1, 2011: Fresh & Easy Neighborhood Market CEO Tim Mason Pockets Nearly $1 Million From Sale of Tesco Shares

February 28, 2011: Changing of the Guard: Clarke Takes Over the Reins as Tesco CEO Wednesday

February 28, 2011: Big Day For Tesco CEO Terry Leahy: Retirement and A Birthday But No Break-Even For Fresh & Easy USA On His Watch


[Also: Click on the following links - , , , , , , , ,  - to read stories about past Tesco annual general (shareholder) meetings and related topics.]
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Wednesday, June 29, 2011

Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market


News/Analysis
Tesco's 2011 Annual General Meeting (AGM)

The CtW Investment Group (part of the Change to Win coalition), which invests and manages money for a number of union pension funds in the U.S. including the United Food & Commercial Workers (UFCW) union, is calling for incoming Tesco plc board chairman Richard Broadbent to order and lead an "objective and independent" review of the United Kingdom-based global retailer’s U.S. Fresh & Easy Neighborhood Market chain.

The union-affiliated investment group's request came in the form of a letter it sent today to Broadbent, in advance of Tesco's Annual General Meeting (AGM), which is being held in Nottingham, UK on Friday.

Broadbent, who is currently deputy chairman at Britain's Barclays Bank, is set to join Tesco's board as a non-executive director July 2. He will become chairman on November 3, 2011, when current board chair David Reid retires. [See - May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3.]

Since Broadbent isn't set to become chairman for four months, it appears CtW Investment Group is timing its letter to the not yet member of Tesco's board and its future chairman to Friday's annual meeting, where he is up for a vote by shareholders to approve his nomination to the global retailer's board of directors, which consists of an about 50%-50% split between Tesco senior executives, including CEO Philip Clarke and deputy CEO and Fresh & Easy Neighborhood Market CEO, Tim Mason, and outside or non-executive directors. As a board member and then as chairman, Broadbent will be a non-executive director, meaning he doesn't work for Tesco.

The group says in the letter an independent review of Fresh & Easy is needed in order to determine what additional steps Tesco needs to take to make good on the commitment made by CEO Philip Clarke after taking over in March of this year that the fledgling U.S. grocery chain, which lost about $307 million on sales of about $818 million in its most recent fiscal year (ended February 26, 2011), will break even by the end of its 2012/13 fiscal year, which is 20 months from now.

There are currently 176 Fresh & Easy Neighborhood Market stores open and operating in California (127 units), Arizona (28) and Nevada (21).

Tesco has opened 22 new Fresh & Easy stores so far this year - 12 in Northern California, its newest market region, and 10 in Southern California, where it has 101 of its 176 stores. There are currently 12 Fresh & Easy grocery markets in Northern California and 14 units each respectively in the Bakersfield and Fresno metropolitan regions in California's Central Valley.

Clark said recently (confirming our earlier report of 40-50 new stores this year) Tesco plans to open 50 new Fresh & Easy stores in 2011. As part of its break-even plan for Fresh & Easy, Tesco says it will have 300 stores open and operating by February 2013, at which point it says it will break even with the U.S. operation.

CtW Investment Group also has a problem with Tesco's proposed new senior executive/board director remuneration or pay plan, which will be voted on by shareholders at the annual meeting on Friday, specifically the part that no longer ties Fresh & Easy Neighborhood Market CEO Tim Mason's pay to performance at the grocery chain.

This argument is really a moot point though, for two reasons.

First, CtW Investment Group last year objected to Mason's pay and bonus structure under Tesco's then pay-for-performance scheme, which is still in effect.

For example, Mason made over $6 million in 2009, despite huge losses [See: Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy] at Fresh & Easy. Tesco said his pay, bonus and stock compensation was in reward for "meeting certain corporate benchmarks and milestones" with Fresh & Easy.

In other words, performance is in the eye of the corporate beholder. And is often the case, it doesn't have to be based on profit and loss, particularly when it comes to start-up-type ventures like Fresh & Easy (four years in November 2011), although in our analysis and opinion Mason's pay last year was too high ($2.5 million might have been reasonable) considering the continued high losses at Fresh & Easy. But we didn't expect him to give any of it back.

More significant though in terms of rendering the argument CtW Investments is making moot in our analysis is the fact as of March 2011 Mason became Tesco's group deputy CEO and chief marketing officer, as well as CEO of Fresh & Easy.

Therefore, unlike from 2006-2010 when his sole responsibility at Tesco was for Fresh & Easy, he is now not only the CEO of the U.S. chain but also deputy CEO to Philip Clarke, as well as the global retailer's chief marketing officer. As such, in our analysis, the argument his pay should be tied to Fresh & Easy's performance, which it really never was in practice if one defines performance as making a profit or at least coming close to break-even, has been rendered moot by his elevation to deputy CEO of Tesco.

Mason has been a member of Tesco's board since February 16, 1995.

Before moving to the U.S. in January 2006 to start up Fresh & Easy as CEO he was Tesco's chief marketing officer, based in the UK, a position he again holds as of March, as part of his job title trifecta at Tesco.

Mason remains based at Fresh & Easy's headquarters in El Segundo, California but has been spending a considerable amount of time since March at Tesco's headquarters in the UK, as well as traveling to its other global outposts. For example, he's spent the last few days in Eastern Europe with his boss, CEO Philip Clarke, and other Tesco senior executives, who are putting on a road show for financial analysts.

CtW investment Group and the UFCW union were front and center, joined by numerous others, at last year's Tesco AGM over the issue of compensation for the global retailer's senior executives who also serve on its board. The pay issue was the major hot button at the 2010 investors' meeting, where a whopping 47% of company shareholders voted against Tesco's Remuneration Report.

[We chronicled the going's on at last year's AGM in this story - July 5, 2010: Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London - which we suggest you read. Also See - June 23, 2010: Tesco Fresh & Easy Neighborhood Market CEO Tim Mason Gets Big Stock Award Featuring a Singular Twist.]

Earlier this month Tesco moved to avoid any such similar behavior from shareholders when they meet in the United Kingdom on Friday, when it released a revamped pay plan for its senior executive/board directors. The new "all for one and one for all" scheme attempts to reward all the senior executives/directors based on Tesco's overall performance, at least in theory.

Ironically, this is what CtW Investment Group and the UFCW union, who's pension funds it manages and invests objects too because it lumps Mason in with all the other Tesco senior executives on the board rather than basing his pay on Fresh & Easy's performance. But as we detailed above, since Mason is deputy CEO and chef marketing officer of Tesco along with being CEO of Fresh & Easy Neighborhood Market, including him in the mix seems kosher to us.

Plus: Who says Mason will remain CEO of Fresh & Easy for long, now that he has major Tesco group responsibilities?

For example, Former CEO of Tesco's operations in Taiwan, Jeff Adams, who was transferred to Fresh & Easy Neighborhood Market in 2008 and is its head of retail operations, a lesser position than he held previously in Taiwan, has been waiting patiently in the wings in El Segundo for nearly three years. He would be one of Tesco deputy CEO Mason's logical internal replacements as CEO of Fresh & Easy - based on the way Tesco does internal succession - should Mason return to the UK.

[For some background on Jeff Adams at Fresh & Easy USA read - March 12, 2008: Breaking News: Tesco plc. Makes Major Personnel Change to Fresh & Easy Neighborhood Market USA Senior Management Team; and September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market.]

The irony involving CtW Investment Group's position on the new executive/director pay sheme is because it appears from all indications we have the majority of Tesco's other investors - CtW holds some stock in Tesco through the pension funds it manages for the UFCW and other labor unions so qualifies as an investor in the company - particularly the big and all-important institutional investors who control the voting, are in favor of the new pay plan, which is expected to pass by a much higher percentage of votes than the Remuneration Plan did last year.

A representative of CtW is set to be at Friday's Tesco AGM, according to the firm. The UFCW union also told us it will have someone there, as it did last year.

We don't expect the same level of fireworks this year as there was in 2010 at the meeting [Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London.] But there should be a robust, albeit brief, discussion of the new pay plan.

We also don't expect any action to be taken by Tesco's board now or in the future regarding the request in the investment group's letter to Richard Broadbent for an "objective and independent" review of Fresh & Easy Neighborhood Market - at least not one the results of which Tesco would make public.

Tesco has a solid agenda for its annual meeting Friday, which only runs for two hours, from 11 am-1 pm. You can view the agenda here.

Fresh & Easy Buzz will have a correspondent at Friday's . We'll be offering news reports and analysis of the annual shareholders' meeting in the blog. Stay tuned.

Related Stories

May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million

March 1, 2011: Fresh & Easy Neighborhood Market CEO Tim Mason Pockets Nearly $1 Million From Sale of Tesco Shares

February 28, 2011: Changing of the Guard: Clarke Takes Over the Reins as Tesco CEO Wednesday

February 28, 2011: Big Day For Tesco CEO Terry Leahy: Retirement and A Birthday But No Break-Even For Fresh & Easy USA On His Watch


[Also: Click on the following links - , , , , , , , ,  - to read stories about past Tesco annual general (shareholder) meetings and related topics.]
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Monday, July 5, 2010

Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London


News/Analysis/Commentary

Yesterday, Independence Day in America, we watched colorful fireworks displays of the pyrotechnical kind.

But on Friday, July 2, at Tesco's Annual General Meeting (AGM) of its shareholders in London, UK, there were colorful fireworks of the verbal kind between Tesco CEO Terry Leahy, who is retiring in March 2011, and Bill Dempsey, an executive of the United Food & Commercial Workers (UFCW) union. A number of Tesco shareholders also got in on the verbal fireworks display.

As we reported in this story on Friday, July 2 - Tesco's Director Remuneration Report Approved at Today's AGM; But 47% of Shareholders Voice Opposition to Director Pay Packages - 38% of Tesco's shareholders, along with an additional 9% who abstained (47% total), voted against approval of the global retailer's Directors' Remuneration Report, the final corporate report of the 2009 compensation packages of Tesco senior executives who also serve on the company's board.

That nearly half of Tesco's shareholders - who in this case are comprised primarily of the big, institutional investors because that's who has most of the voting rights - voted against or abstained from voting for the Remuneration Report's approval is being considered as the largest shareholder rebellion seen in The City (the UK's version of Wall Street) this year.

The vote against Tesco's boardroom pay policy, which surprised almost everyone in terms of its intensity, comes on the heels of reports issued recently by at least four corporate governance groups - CtW Investment Group, Pirc, RiskMetrics and Manifest - critical of Tesco's director pay packages. All four of these groups encouraged shareholders to vote against the Remuneration Report prior to Friday's AGM and vote on the matter.

Additionally, analysts in the food retailing group at financial firm Citi issued a report - "Tesco: The Year Ahead Might Be Difficult Too," - on April 21, 2010, suggesting Tesco's "aggressive" accounting practices, although not illegal, leave much to be desired. The Citi report also suggested Tesco's director compensation was too high in relation to its accounting practices.

In the report, the Citi analysts accuse Tesco of over-aggressive accounting practices and argue its profits last year would have been £800 million ($1.214 billion) lower if the retailer added up the numbers in the same way as most of its UK competitors, such as the Morrisons supermarket chain, do. But Tesco chairman David Reid said at Friday's AGM there are "material inaccuracies" in the Citi report. However, he didn't go into specifics, nor has Tesco issued a written rebuttal to the report. Reid stated at the AGM that the board is "absolutely satisfied that our accounting policies are appropriate".

The primary focus of the director pay revolt - and it's not over just because the 2010 AGM is and the vote to approve prevailed, as we suggested it would - is Tesco director and Fresh & Easy Neighborhood Market USA CEO Tim Mason and his $6 million-plus 2009 pay package. Mason will add the additional title of deputy-CEO in March 2011, when CEO Leahy retires and current director of international operations and IT Philip Clarke takes over as CEO.

[See our recent stories linked for background on Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason's 2009 compensation package. June 4, 2010: Every Little (Bit) Helps: Tesco Fresh & Easy Neighborhood Market CEO Mason Paid $6.188 Million For 2009 and June 23, 2010:Tesco Fresh & Easy Neighborhood Market CEO Tim Mason Gets Big Stock Award Featuring a Singular Twist]

The basic argument is that since Fresh & Easy lost $253 million in Tesco's fiscal year 2009/10, which ended in February 2010, along with the fact Tesco is predicting a similar loss for this fiscal year, which ends in February, 2011, Tim Mason's $6 million-plus pay package is out of sorts in the northern direction based on his performance as CEO of Fresh & Easy.

However, Tesco said at Friday's AGM that Mason's 2009 compensation isn't based on Fresh & Easy's performance because it's still in start-up mode. Rather, a company spokesperson said, Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason's compensation is based on a combination of his contributions as a corporate director, along with criteria at Fresh & Easy like the "look of the stores and customer response" to the business.

However, Mason's total compensation was second only to Tesco CEO Terry Leahy's; even higher than that of incoming (March 11, 2001) Tesco CEO Philip Clarke's total package.

The fireworks: Tim Mason's $6 million-plus pay package, and Fresh & Easy in general, was the topic of considerable conversation and discussion by investors at Friday's shareholders' meeting. Fresh & Easy Neighborhood Market and CEO Mason's compensation also came up repeatedly during a question and answer session between investors and Tesco's board.

For example, one Tesco shareholder, a private investor, told the board he's voiced considerable skepticism in the past, as well as now, about the retailer's Fresh & Easy venture. But each time, he said, "you disregard me," and others who have similar concerns.

The fireworks started to emerge a bit stronger when Michael Garland, director of value strategies for the CtW Investment Group, told the board he and other investors want to know whether Tesco has taken any steps to independently assess its business strategy for Fresh & Easy, since it's failed to reach profitability, and since Tesco says it won't come close to break-even next year. He also questioned whether the pay of Tim Mason and other executives has any connection to performance metrics and standards.

In response, Tesco board chairman David Reid said: "We do have strong independent oversight of the board." But he didn't go into detail.

In his response, Reid also reiterated what Tesco has been saying about its Fresh & Easy venture for a little over two years now in regard to attempting to explain the basis of CEO Tim Mason's pay package and the performance to date of Fresh & Easy: "It’s not easy [Fresh & Easy] because of the economic conditions [in California, Nevada and Arizona] but we absolutely believe in it. We are on the case and getting on with it, he said.

CtW Investment Group invests pension fund money for the Change to Win coalition of labor unions in the U.S., which includes the United Foods & Commercial (UFCW) union. It's an investor in Tesco for the unions.

Then the really colorful verbal fireworks started - the Tesco 2010 AGM verbal equivalent of yesterday's huge Macy's Fourth of July fireworks display in New York City.

Bill Dempsey, director of the UFCW union's Capital Stewardship Program, stepped to the microphone and charged Tesco's senior management of taking a "litigious, divisive approach" in the U.S. with its Fresh & Easy Neighborhood Market and refusing to meet with the UFCW, which represents 1.3 million retail grocery store workers and employees at allied businesses in the U.S., Canada and Puerto Rico.

Dempsey, who's last name happens to be the same as that of the late and famous Irish-American boxer, Jack Dempsey, who's nickname was the "The Manassa Mauler," then counter-punched, saying: “If the Tories and the Lib Dems can agree to form a government, why can’t the [Tesco] management agree to one meeting with the union?" he asked the board.

Apparently Dempsey's comments got Tesco CEO Sir Terry Leahy's Irish up. Feeling his steel cut oats, Leahy replied: "Your union [UFCW] has never welcomed Tesco to the US. You opposed Tesco from day one, and you have gone on opposing and obstructing. This is no basis for a partnership."

Leahy then went on to tell Bill Dempsey, who is no shrinking Irish shamrock himself, that Tesco has "excellent relations" with its Fresh & Easy Neighborhood Market employees in the U.S., who - he added with emphasis - don't wish to join the UFCW union.

This is the very first time Tesco CEO Leahy has spoken out in such a public forum on the Fresh & Easy-UFCW issue in any length, beyond saying: "It's up to our employees to decide if they want to join a union in the U.S." It appears Sir Terry has now determined that Fresh & Easy's store-level workers have decided they don't want to join the UFCW, at least based on his response to Bill Dempsey's question at Friday's shareholder meeting.

Sir Terry's response also offers a glimpse of what sources have told us has been a seething - and perhaps even loathing - feeling he's developed over the UFCW regarding the union's nearly three-year campaign to organize Fresh & Easy workers, and some of the methods its used in working towards its goal, both in the U.S. and in Britain.

Perhaps the Tesco CEO allowed a bit of that seething steam to escape on Friday, since he's a short-timer, retiring from Tesco on March 11, 2011. Leahy has no plans to join Tesco's board as a non-executive member when he retires either. Therefore, come March 11 he will be cutting all formal ties, accept perhaps as a personal investor, with Tesco. In other words, Friday's AGM was his last chance - and ironically the first opportunity he's taken - to vent his feelings on the union issue in a major public forum as Tesco's CEO.

It is a fact though that the UFCW has asked Tesco CEO Leahy and members of the board to meet with them numerous times, including the time in early 2008 when Joseph Hanson, the UFCW's international president, asked Britain's Prince Andrew to arrange a sit-down for him with representatives of Tesco's senior management and members of the board. [See - February 11, 2008: Supermarket Union President Asks Britain's Prince Andrew to Arrange A 'Sit-Down' With Tesco Fresh & Easy Neighborhood Market Senior Executives]

Tesco though has always refused to meet with the UFCW executives, including that time. And perhaps the decision by CEO Leahy not to meet with UFCW executives, despite multiple invites, was in-part behind Bill Dempsey's getting his Irish up and feeling his steel cut oats in terms of his comments to CEO Leahy and the members of the board? The UFCW is an investor in Tesco through its pension funds, which are managed by the CtW Investment Group.

The tension between Tesco and the UFCW is high, and Friday's AGM, just two days before the Fourth of July holiday in America, is one of only three times in the last three years - the 2008 and 2009 AGM's being the other two - where executives of the UFCW and Tesco have been in the same room together. And the verbal fireworks were no less incendiary than the physical ones were yesterday, at the various Independence Day celebrations in cities and towns across America.

Now that the 2010 AGM has come and gone, including all the verbal fireworks, what does it all mean going forward? Very little in terms of anything changing the situation.

The bottom line is that Tesco does not want Fresh & Easy Neighborhood Market unionized. It's model - and hope - for a successful U.S. food and grocery retailing division is more similar to the non-union chains Trader Joe's, Whole Foods Market, Aldi and a couple others, rather than the big union chains like Kroger and Safeway.

On the other hand, Tesco's Fresh & Easy Neighborhood Market USA has been one of the UFCW's top three (and often number one) priorities in terms of its organizing of non-union chains in the U.S., despite the fact Fresh & Easy has under $500 million in annual sales and has lost half that much in the two fiscal years Tesco has been keeping count.

Tesco isn't likely to meet with members of the UFCW, unless it acquires a union chain and then has to. Meanwhile, the UFCW hasn't been able to get the employees at even one of Tesco's Fresh & Easy stores to call for a union vote to date, despite trying extremely hard to do so, and coming close.

As such, in our analysis and opinion, when it comes to Tesco in America with Fresh & Easy and the UFCW union, what we're going to see is more of the same: continued organizing and campaigning by the union - including taking Tesco's Fresh & Easy before the National Labor Relations Board like it's recently been doing; and continued defense against unionization by Tesco and its Fresh & Easy chain, which currently has 159 stores in California, Nevada and Arizona.

Related Posts

July 2, 2010: Tesco's Director Remuneration Report Approved at Today's AGM; But 47% of Shareholders Voice Opposition to Director Pay Packages

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'

Additionally

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.
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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'

Plus

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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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.
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Wednesday, June 23, 2010

Tesco Fresh & Easy Neighborhood Market CEO Tim Mason Gets Big Stock Award Featuring a Singular Twist


News & Analysis

Tesco plc director and Fresh & Easy Neighborhood Market USA CEO Tim Mason (pictured above) has been granted rights to 292,085 ordinary shares of United Kingdom-based Tesco plc stock under Tesco's executive incentive plan, for which no payment by the reciepient is required. It's essentially a stock grant.

The shares were awarded to Fresh & Easy CEO Mason yesterday as part of Tesco's 2009/10 fiscal year annual defered bonus for the company's top executives, who are also members of its board of directors.

The number of shares awarded to Mr. Mason was calculated using an average Tesco plc market price of 388.05 pence, according to Tesco plc's investor relations department.

In addition to Tim Mason's stock share grant of 292, 085 shares, Tesco plc CEO Terry Leahy received a bonus award of 459,644 shares.

The following other Tesco executives-directors received the stock awards yesterday:

>Commercial and Marketing Director Richard W Brasher, 196,696 shares
>International and IT Director, Incoming CEO, Philip A Clarke, 196,696 shares
>Chief of Retailing Services and Group Strategy Director Andrew T Higginson, 196,696 shares
>Retail and Logistics Director David T Potts, 196,696 shares
>Group Finance Director Laurie McIlwee, 147,522 shares
>Corporate and Legal Affairs Director Lucy Neville-Rolfe, 147,522 shares

In an interesting development, all of the directors except for Fresh & Easy Neighborhood Market CEO Tim Mason, received their share awards in the form of nil cost options (share options that can be exercised without payment of a subscription price; essentially a regular stock option). In contrast, Mason's 292,085 shares is in the form of an unfunded promise to deliver shares, which means, among other things, he can't exercise the options at any time, like the others can if they choose to.

For Tim Mason this basically means that unlike the other directors, who's shares will be increased to reflect the dividends that would have accrued on vested shares had they been reinvested in shares in the period between the stock grant and its exercise (the nil cost option), and can be exercised if desired, his award is what's called grant and vesting (an unfunded promise to deliver shares), which means the award will vest but Mason won't be able to exercise any of the 292,085 shares before May 22, 2013.

We suspect, among other considerations, the special handling of Tesco plc director and Fresh & Easy Neighborhood Market CEO Tim Mason's stock award might have something to do, but not exclusively by any means, with Tesco's being under attack by the CtW Investment Group, which invests money from labor union pension funds in various corporations, including Tesco plc. The group is arguing that Mason received excessive compensation for fiscal year 2009/10. [Read our June 4, 2010 story on his compensation package here: June 4, 2010 - Every Little (Bit) Helps: Tesco Fresh & Easy Neighborhood Market CEO Mason Paid $6.188 Million For 2009]

On June 17, 2010, CtW investment Group and the Change to Win coalition of labor unions, many of which have pension fund monies invested in Tesco, sent this letter to Tesco plc shareholders regarding Tim Mason's pay package. In the letter they urge Tesco shareholders to vote no on proxy Item #2, the Directors' Remuneration Report, at Tesco’s upcoming July 2 annual shareholder meeting in London, UK.

The group also distributed this press release about the letter and campaign to media outlets far and wide on June 17. The release has generated considerable press on the issue, focusing on Mason's 2009/10 pay package and the group's attempt to get Tesco plc shareholders to vote against it at the July 2, 2010 shareholders meeting.

Perhaps Tesco believes that granting Tim Mason's stock award on the unfunded promise basis, which means he can't exercise any of the shares until May 22, 2013, will help blunt some of this criticism, leading to a majority vote of Tesco shareholders in favor of the Directors' Remuneration Report at the July 2 shareholder meeting. Or perhaps, among other considerations, it's just good politics, considering Fresh & Easy's $253 million loss for fiscal year 2009/10? If shareholders were to vote the report down it would mean Tesco couldn't go forward with the pay packages, including the stock awards listed above, for the corporation's directors.

The objective reality is the probability of Ctw Investment Group and the labor union group getting a majority investor vote against the Directors Remuneration report is highly unlikely for a number of reasons, chief among those reasons being that the majority of Tesco investors with voting rights are the big, institutional investors. For example, U.S. billionaire Warren Buffett, who owns 3% (about $1.3 -to- $1.4 billion in value) of Tesco plc through his Berkshire Hathaway holding company and investment firm, won't likely vote against the report.

These big investors will likely vote for the package for two key reasons. First, Tesco plc had record profits in its 2009/10 fiscal year. Therefore the investors aren't going to let Tim Mason's pay package get in the way of affirming the report. Second, these institutional investors don't want to veto the report because doing so would lead to a drop in Tesco's stock share price, meaning their investments would drop in value.

Adding to this, voting against the report would likely lead to uncertainty in the market vis-a-vis Tesco plc, potentially leading to further reductions in the retailer's share price. This is the last thing these big, institutional investors want to happen.

The investor-types at CtW Investment Group are aware of this probability, as are the heads of the labor unions. Or they should be. Ctw has authored resolutions at previous Tesco annual meetings that were rejected by these same big, institutional investors, who've got the votes.

However, the unions see a secondary benefit to the "vote against the report" campaign, which is to increase the pressure on Tesco via investors and the public (via the media) in its efforts to organize and unionize Fresh & Easy Neighborhood Market's store-level employees, which the United Food & Commercial Workers (UFCW) union has been trying to do since the first Tesco-owned Fresh & Easy grocery stores opened in late 2007.

Tesco's annual shareholder meeting is just 10 days away. Therefore we'll see the results of this issue come to a head very soon, at least in terms of the shareholder vote - but certainly not in terms of the ongoing campaign to unionize Fresh & Easy workers.

Fresh & Easy Buzz Linkage: Related Stories:

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

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

June 20, 2010: NLRB Judge Rules Against Key Fresh & Easy Neighborhood Market Supplier '2 Sisters Food Group' in Labor Relations Violations Case

June 20, 2010: NLRB Judge Rules Against Fresh & Easy Neighborhood Market in Spring Valley CA Store Labor Law Violation Case

March 4, 2010 - Aministrative Law Judge Finds Tesco's Fresh & Easy Violated Labor Relations Act in Ex-Store Employee, UFCW Union Complaint

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

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

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

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

Some additional links here.

[Photo credit: Fresh & Easy Neighborhood Market]
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