Showing posts with label Tim Mason fy 2009-10 conpensation. Show all posts
Showing posts with label Tim Mason fy 2009-10 conpensation. 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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Wednesday, July 21, 2010

Fresh & Easy Neighborhood Market CEO Tim Mason Leads All Directors in Tesco Stock Share Incentive Plan Payouts

Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason at the opening of the grocery chain's 150th store, on April 7, 2010. The store is at Olive and Verdugo in Burbank, California. [Photo credit: Fresh & Easy Neighborhood Market.]

News/Analysis/Commentary

Yesterday (July 20, 2010), eight Tesco directors - CEO Terry Leahy, current director of international operations and IT and incoming (March 11, 2010) CEO Philip Clarke, Fresh & Easy Neighborhood Market USA CEO Tim Mason, Richard Brasher, Andrew Higginson, Laurie McIlwee, Lucy Neville-Rolfe and David Potts - received ordinary shares of 5p each in Tesco plc stock, according to a required regulatory announcement from Tesco today. In March 2011, Tim Mason will have the title of Co-CEO (of Tesco plc) added to his director and Fresh & Easy Neighborhood Market CEO titles.

The stock shares were released to the eight directors, who also comprise Tesco's senior executive ranks, yesterday, at the end of the required three-year holding period. The shares come from: (1) the Tesco Long Term Incentive Plan, (2) the Tesco Executive Incentive Plan and (3) the Tesco Performance Share Plan.

Tesco's share price on Tuesday, July 20, when the directors received the stock, was 394.025p per share ($596.790 at today's exchange rate), according to Tesco plc. The company says it retained a proportion of the gross number of shares to cover the income tax and national insurance liability of the directors.

The top beneficiary of the stock share payout wasn't Tesco plc CEO Terry Leahy, who is retiring in March 2011. And it wasn't Philip Clarke, who will take over as CEO when Leahy retires early next year. Rather, it was Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason, who bagged the highest number of shares from the retailer's plans, even more than CEO Leahy.

Below is a list of the eight directors, ranked by the number of shares they received yesterday.

Director/number of shares received:

1. Tim Mason
388,524 shares

2. Terry Leahy
372,099 shares

3. Richard Brasher
198,024 shares

4. Philip Clarke
125,311 shares

5. David Potts
125,311

6. Andrew Higginson
125,311

7. Laurie McIlwee
44,236 shares

8. Lucy Neville-Rolfe
1,876 shares

At the close of the market today (July 21, 2010), Tesco plc shares were trading at 397.75 pounds per share ($602.432 at today's exchange rate). The stock shares from the plans were released to the directors yesterday at a price of 394.025p per share ($596.790).

Since the shares are being released to the Tesco directors after a three year holding period, in the case of Tim Mason, the time period tracks closely to when he came to America to start up Fresh & Easy, which was in late 2006-early 2007.

Mason's compensation has been a hot topic of late in light of the poor performance of Tesco's El Segundo, California-based chain of 159 Fresh & Easy Neighborhood Market fresh food and grocery stores, which are located in California (Southern and the Central Valley), Metropolitan Las Vegas, Nevada and Metro Phoenix, Arizona.

Read our stories linked below, for the details:

July 5, 2010: Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London

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

Tesco reported a loss of $253 million, on sales of $544 million, for its Fresh & Easy Neighborhood Market USA fresh foods and grocery chain for the 2009/10 fiscal year, which ended in February of this year. [See - April 20, 2010: Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy]

In addition, Tesco reported a loss of $208 million for Fresh & Easy in its 2008/09 fiscal year. Fiscal year 2008/09 revenue for Fresh & Easy was $305 million.

Tesco has also projected a loss in the $200 -to- $253 million range, about the same as fiscal year 2009/10, for this fiscal year (2010/11), which ends in early 2011.

The first Fresh & Easy stores opened in November 2007.

Tesco and its Fresh & Easy Neighborhood Market chain under Tim Mason's leadership has also missed its goal of having 200 stores opened by the end of 2009 - there were about 120 units - and had set a goal of having about 300 stores opened, including in Northern California, by the end of 2010. It will miss the benchmark considerably. Based on current projections, there will be just under 200 Fresh & Easy markets open and operating at the end of this year. Tesco has yet to open any stores in Northern California.

If Tim Mason were to redeem the 388,524 shares of Tesco stock he received yesterday at today's share price he could do all sorts of fun things with the cash, like invest in a bicycle racing team in the UK, perhaps, or in surf shop in Santa Monica, California, maybe. Or he could give each of the employees of Fresh & Easy Neighborhood Market a nice little gift - or at least a reusable grocery bag full of food and groceries, which would have the secondary benefit of being a nice one shot sales boost for Fresh & Easy.

We don't begrudge Mr. Mason his stock shares or huge 2009 compensation package. And, he is a director of Tesco, which has been performing very well, with the exception of Fresh & Easy, in addition to running Fresh & Easy. But his $6.1 million compensation for last year and stock share payout looks (and frankly is) odd in relation to the performance of Fresh & Easy Neighborhood Market, which has been pretty much 100% of his focus since 2006. [See - June 4, 2010: Every Little (Bit) Helps: Tesco Fresh & Easy Neighborhood Market CEO Mason Paid $6.188 Million For 2009]

It's not up to us though to do anything about it, even if we wanted to. That's for Tesco's board, seven members of which received stock shares along with Tim Mason yesterday, and its investors to deal with. We report and analyze - they decide.

However, with a $200 million-plus loss predicted by Tesco for Fresh & Easy at the end of the current fiscal year - and based on our analysis there being nothing we can currently see that will change that for the 2011/12 fiscal year - you've got to wonder. And a reasonable man or woman - investor or non-investor - should ask such performance-related questions.
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Friday, June 4, 2010

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

Tesco's Fresh & Easy Neighborhood Market USA hasn't come close to break-even yet. (The first stores opened in November 2007.) The nearly three-year-old fresh food and grocery chain posted a loss of $253 million for its 2009/10 fiscal year ended February 27, 2010, which is $45 million more than the $208 million loss Tesco reported for Fresh & Easy for its 2008/09 fiscal year. But Fresh & Easy CEO and Tesco plc director Tim Mason (at left) is doing just fine in terms of compensation, thank you: He pocketed $6.188 million (£4.27 million) last year for his efforts, about $3.477 million (£2.4 million) of it as a bonus, according to Tesco.

In fact, only one other member of United Kingdom-based Tesco plc's senior management team, its leader CEO Sir Terry Leahy, carted home more money in salary, bonus and stock last year than did Mr. Mason. CEO Leahy, who's been with Tesco for 31 years and CEO for 13 of those years, took home a combined total of £5.22 million ($7.564 million) for 2009. His salary portion of the total was £1.4 million ($2.028 million), with the rest being in various forms of performance-related pay. Tim Mason was Tesco's second-highest wage earner after CEO Leahy in 2008 as well.

Interestingly, CEO Leahy's 2009 total compensation the previous year was at £5.1 million ($7.390 million) at bit less than he took home this year because he took a pay cut in 2008/09 of £370,000 ($536,167) due to Fresh & Easy's failure to hit certain performance targets. Apparently the fact Fresh & Easy lost $45 million more in fiscal 2009/10 than it did in 2008/09 didn't trigger a pay cut for Leahy this time around. And it certainly didn't for Fresh & Easy CEO Mason, who earned nearly as much total pay as Leahy did for fiscal year 2009/10.

Tim Mason's and Terry Leahy's bonuses come out of a total pool of £24 million ($34,778) allocated by Tesco for its senior executive team, the result of achieving its highest profits in the company's 91-year history for the 2009/10 fiscal year.

Tesco also said it's created a bonus pot of £105 million ($151.777 million), which will be distributed to 216,000 of its employees in the United Kingdom, ranging from store clerks and office staffers to warehouse workers, as part of its annual "Shares in Success" worker bonus program. None of those funds go to employees of Tesco's U.S. Fresh & Easy chain. Tesco hasn't disclosed, and we haven't verified one way or the other, if Fresh & Easy workers are receiving a similar bonus.

Tim Mason has worked for Tesco since 1982. Mason, who is the the son-in-law of Lord MacLaurin, the former chief executive of Tesco who groomed Sir Terry Leahy for his current CEO position, started out with the retailer as a dry grocery category buyer, moving into the marketing department after two or three years. There he learned the Tesco marketing ropes working alongside then marketing director Leahy. In 1995 he became marketing director of Tesco in the United Kingdom. Before coming to California to launch Fresh & Easy in 2006, Tim Mason also was chairman of Tesco's online operations, Tesco.com, which as marketing director he played a major part in creating.

Succeed or fail, from a compensation standpoint Fresh & Easy Neighborhood Market is a win-win for CEO Tim Mason. His total compensation, including bonus, is based on Tesco's overall performance. In addition, since he is a corporate director of Tesco plc, along with being the CEO of its U.S. operation, he gets stock options based not on Fresh & Easy's performance but on that of Tesco as a whole.

Of course if Fresh & Easy Neighborhood Market does succeed in terms of hitting certain performance standards, both CEO Mason and Tesco plc CEO Leahy stand to win big. For example, according to Tesco, Leahy and Mason are entitled to nearly 50 per cent of their respective salaries in deferred company stock if Fresh & Easy hits certain performance targets over a given period of time. From a purely compensation standpoint that's the definition of success for Mason and Sir Terry at Fresh & Easy. According to Tesco, CEO Leahy was awarded 65 per cent of the potential maximum number of those shares as part of his annual bonus this year. It didn't say if Mason was awarded any of his shares as part of his bonus for the 2009/10 fiscal year.

That's the big win. But taking home $6,188 million as the head of a grocery chain that's lost nearly half a billion dollars in the last two years isn't bad either. In fact, it's nice work if you can get it, albeit at times it's probably a bit challenging and frustrating. Perhaps there's some sort of start up-oriented incentive pay built into that $6.188 million? And, in these times, like Tesco's famous slogan says: "Every Little (Bit) Helps."
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