'Human Rights Watch' Calls Tesco and its Fresh & Easy Neighborhood Market 'Labor Rights Violator' in the USA

Pictured above is Tesco plc director and Fresh & Easy Neighborhood Market USA CEO Tim Mason. Mason came to America in 2006 to start up Fresh & Easy for Tesco as the CEO. The first stores openened in November 2007. Prior to coming the the U.S., he was director of marketing for Tesco, at its global corporate headquarters in the United Kingdom. In March, 2011, Mason will be given the title of Co-CEO of Tesco plc, although the company says he will remain in California as CEO of Fresh & Easy. See here.

News & Analysis

The New York City-based human rights watchdog group Human Rights Watch issued a blistering report today that singles out United Kingdom-based Tesco and its Fresh & Easy Neighborhood Market USA as one of a handful of European companies doing business in the U.S. that have been "carrying out aggressive campaigns to keep their employees in the United States from organizing and bargaining, violating international standards and, often, US labor laws."

The charge by Human Rights Watch comes amidst a now three year campaign by the United Food & Commercial Workers union (UFCW) to organize store-level employees at Tesco's Fresh & Easy, which has 159 stores in California (Southern and the Central Valley); Metropolitan Phoenix, Arizona; and in Nevada's Las Vegas Metro region.

"Many European companies that publicly embrace workers' rights under global labor standards nevertheless undermine workers' rights in their U.S. operations, a Human Rights Watch spokesperson says. Tesco [with Fresh & Easy] is one of those European companies."

The 130-page report, "A Strange Case: Violations of Workers' Freedom of Association in the United States by European Multinational Corporations," goes into some detail, quoting a few former Tesco Fresh & Easy employees.

For example, Shasta Furman, a former worker at a Tesco Fresh & Easy Neighborhood Market store in San Diego, says in the report: "It was constantly driven home to us in team-lead meetings that we should tell employees they have no need for the union, that the company will take care of them so they don't need a union. When the union started passing out flyers outside our store, my manager told us 'You don't want to be part of it. These are not the right people for you.'"

Another former Fresh & Easy San Diego store employee, team leader (assistant manager) Fred Baquet, told Human Rights Watch in an interview for the report: "We had lots of issues. The time sheets were confusing. They had us working through breaks and lunch. People lost a lot of money. I would bring up people's pay problems and management would tell me to tell them... 'If you don't like it, there's the door.' People came to me with complaints and I told them, 'My job's on the line, too.' The managers were always preaching 'no union' to us. Anything union was unmentionable because it could cost you your job."

Human Rights Watch says today's report is based on interviews with workers, employees' legal testimonies, findings of US arbitration panels, company documents, and written exchanges with company management. The report is part of the human rights group's efforts to further strengthen and promote labor laws in the U.S, which it argues are designed to allow employers to side-step human rights conventions and prevent unions from organizing workers.

Along with United Kingdom-based Tesco, which owns and operates El-Segundo, California-based Fresh & Easy Neighborhood Market, the following European companies doing business in the U.S. are named in the report: Deutsche Telekom and T-Mobile; Deutsche Post and DHL Express; mSaint-Gobain; Sodexo; Group 4 Securicor PLC; Kongsberg Automotive100; Gamma Holding and National Wire Fabric107; Siemens115.

"The behavior of these companies, including Tesco's Fresh & Easy, casts serious doubt on the value of voluntary commitments to human rights," says Arvind Ganesan, director of the Business and Human Rights Program at Human Rights Watch. "Companies need to be held accountable, to their own stated commitments and to strong legal standards."

Among the violations Human Rights Watch says it documents in the report are "practices of forcing workers into 'captive audience' meetings to hear anti-union harangues while prohibiting pro-union voices, threatening dire consequences if workers form unions, threatening to permanently replace workers who exercise the right to strike, spying on employee organizers, and even firing workers who support organizing efforts at companies."

Human Rights Watch says this about Tesco's Fresh & Easy Neighborhood Market USA: Fresh & Easy "has created an anti-union atmosphere, and employees who want to organize union activities live in fear for their jobs."

Here are links to two responses to Human Rights Watch from Tesco regarding the organization's claims and report: Response from Tescoto HRW 7-26-2010 and Response from Tesco to HRW10-22-09.

Tesco said today in a statement about the report, which singles out its Fresh & Easy chain as a human rights violator when it comes to labor relations: "Wherever we operate, all staff are free to join trade unions and we have positive relations with trade unions around the world...This report is a further example of misleading allegations being used to misrepresent our position."

In describing the methodology behind its report, Human Rights Watch says: "The Human Rights Watch report is based on thirty interviews with workers and employees' testimony in legal proceedings, findings and decisions of US labor law authorities, company documents, and written exchanges with company management.

Tesco's Fresh & Easy Neighborhood Market has lost two cases in National Labor Relations Board (NLRB) hearings before Administrative Law Court Judges this year, in which employees and the UFCW union charged the grocery chain with violations of the U.S. Labor Relations Act. Fresh & Easy Buzz reported on both of these cases. In fact, Human Rights Watch sites those two cases as the primary basis for its arguments in today's report. (See here.)

Read the two stories linked below:

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

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

A couple months ago, Tesco bought out its meat suppler for Fresh & Easy, 2 Sisters Food Group. The buyout came shortly after an Administrative Law Judge found 2 Sisters Food Group, which was an independent company that had no ownership affiliation with Tesco or Tesco's Fresh & Easy, in violation of U.S. labor laws in a case involving its firing of six employees over the issue of a union vote at the meat plant. Read our June report: June 20, 2010 NLRB Judge Rules Against Key Fresh & Easy Neighborhood Market Supplier '2 Sisters Food Group' in Labor Relations Violations Case. Also see: June 21, 2010: The Missing Link in Tesco's Purchase of Fresh & Easy Neighborhood Market Meat Supplier '2 Sisters Food Group.'

Tesco brought 2 Sisters Food Group's (its major meat product supplier in the UK) along with it in 2006-2007, when it set up shop in Southern California for Fresh & Easy Neighborhood Market. A couple months ago Tesco bought out 2 Sisters Food Group, along with its produce supplier for Fresh & Easy, Wild Rocket, for what Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason will only say was "tens of millions" of dollars.

Fresh & Easy Buzz has been closely covering the UFCW union/Tesco Fresh & Easy labor issue for nearly three years. We written reported extensively on the topic, along with offering much analysis. [Click here, here and here for a selection of our stories on the topic/issue. Use the older link at the bottom of the linked page for additional stories and pages.]

In our analysis, it's too early to know the affect today's Human Rights Watch report will have on Tesco's Fresh & Easy Neighborhood Market. However, the human rights group is respected, and counts among its members numerous influential opinion leaders from various walks of like, including many who live in California, where Fresh & Easy is headquartered and has 98 of its current 159 stores. (Thirty four stores are in Metro Phoenix; 27 in Metro Las Vegas.)

We do see the report, and the Human Rights Watch support, as giving the UFCW's on-going efforts to organize Fresh & Easy employees a boost. The union will now be able to point to the human rights group as a respected independent source which agrees with what the union has been arguing about Tesco's Fresh & Easy since 2007, which is that it will do whatever it takes to remain non-union, a charge Tesco has denied is true.

But approval of labor unions by U.S. consumers is at a near all time low, according to Gallup, the leading U.S. polling firm.

A slim majority of 52% of Americans say they approve of labor unions, the second lowest approval rating in Gallup's 70-year history of polling on the topic, behind only last year's 48%, the polling firm found in a poll taken this month (August 5-8, 2010).

Gallup says it first asked Americans to evaluate labor unions in 1936, at which time 72% approved. The all-time high of 75% approval came in 1953 and 1957 surveys. Support for unions declined in the late 1960s and early 1970s, but mostly hovered around the 60% mark until last year, when it dropped below the majority level for the first time, according to the polling firm.

In the August, 2010 poll, 10% of Americans identify themselves as union members, and an additional 6% say another member of their household belongs to a union. Seventy-two percent of Americans who are union members or live in a union household approve of unions, compared with 48% of those in non-union households.

Union approval varies widely by political party affiliation - It's 71% among Democrats compared with 34% of Republicans and 49% among independents. All three party groups expressed their lowest approval of unions last year and, although views improved slightly, they remain less positive than before.

Gallup finds significantly more Americans saying they want labor unions to have less (40%) rather than more (29%) influence than they have today. Twenty-seven percent say their influence should stay about the same.

Prior to last year, Americans were about equally divided in saying they wanted labor unions to have more versus less influence, or showed a tendency toward wanting unions to have more influence.

Regardless of their preference, Americans by a nearly 2-to-1 margin predict union influence will decline in the future. The poll finds 46% of Americans saying unions will become weaker in the future compared with 25% who say stronger. This general pattern has held each time Gallup has asked the question since 1999.

Gallup adds a slight caveat to the poll results however: "Labor unions are less popular now in the United States than they have been for most of the last 70 years. One reason for this could be the economic downturn. With many Americans out of work and struggling to find work, organized labor groups' missions may not seem appropriate or even fair as they might have when jobs are more plentiful. There is some precedence for an economic-related downturn in union approval, as Gallup found a mild drop in union approval during the late 1970s and early 1980s when the U.S. economy was in poor shape."

Additionally, "The more negative appraisal of unions the last two years could be due to the belief from union opponents that unions are likely to benefit or are benefiting from the policies of the Obama administration, including recent legislation providing aid to states that will preserve thousands of education and public sector jobs," Gallup adds about the poll's results.

Fresh & Easy Buzz doesn't put its stock in one poll. However, numerous other polls reflect opinions similar to what Gallup found this month.

But it's important to not lump all unions into the same pile. For example, in California the UFCW union is very strong. The state's top grocery chains - Kroger (Ralphs/Food 4 Less), Safeway/Vons, Albertsons, Stater Bros., Save Mart, Raley's and numerous others, as well as many multi and even single-store independents - are unionized. These grocers represent the majority of groceries sold in California annually from a market share perspective.

The UFCW is a fairly popular union in California overall. This is evidenced in the level of support union-store employees tend to get from shoppers whenever they've gone out on strike over contract issues with the chains. Although we've seen the level of popularity wane a bit over the last decade.

But, on the other hand, the fastest-growing food and grocery retailers in California - and in most parts of the U.S. - are non-union. These include Walmart, which is now the number one grocery retailer in America, Costco (it has some union affiliation in Northern California), Target, Whole Foods Market, Trader Joe's, Sprouts Farmers Market, Henry's Farmers Market, Tesco's Fresh & Easy, and a couple others.

The UFCW hasn't been able to unionize any of the fast-growing chains mentioned above, even though in some instances - Walmart particularly - it been trying to do so for over a decade.

The less than enthusiastic opinion of labor unions does help Tesco in its battle with the UFCW, although it is a relative form of help. For example, with two Administrative Law Judges finding Tesco's Fresh & Easy in violation of U.S. labor law so far this year - and we're told more cases are going to be brought to the NLRB by current and former Fresh & Easy employees together with the UFCW - the grocer is giving its opposition a lot of ammunition.

Right now, the store to watch in terms of union organization and activity at Tesco's Fresh & Easy is its unit at 4211 Eagle Rock Boulevard, in the Glassell Park neighborhood in northeast Los Angeles.

As we recently reported in this story - July 24, 2010: Employees at the Glassell Park-Eagle Rock Fresh & Easy Neighborhood Market Store in Los Angeles Seeking Union Recognition From Tesco - A group of employees recently told Fresh & Easy Buzz they have or are close to having a majority of store workers in agreement that they want to join the United Foods & Commercial Workers (UFCW) union.

Some of the store's employees met with Fresh & Easy Neighborhood Market executives at corporate headquarters in El Segundo, California on March 26, and requested to be recognized as a union store, as we reported in the July piece linked above. Tesco has thus far denied the Glassell Park store workers' request, which isn't uncommon for a company to do.

You can read the full report issued today by Human Rights Watch, "A Strange Case: Violations of Workers' Freedom of Association in the United States by European Multinational Corporations," here.

California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

Breaking Buzz: California

California Assembly Bill 1060, (AB 1060), which bans the sale of alcoholic beverages at self-service checkout counters in grocery stores and all other types of retail stores offering alcoholic beverages for sale, passed in the California State Senate yesterday. The vote was 22 -to- 12 in favor.

[Read our August 15, 2010 story: Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores for background and details on the legislation.]

The bill now goes to California Governor Arnold Schwarzenegger, either for his signature or veto. If the Governor signs AB 1060, it will become law in the Golden State. The Governor hasn't said whether he plans to sign or veto the bill.

The California Grocers Association (CGA), the trade group for chain and independent grocers in California, is asking the Governor to veto the self-service checkout alcoholic beverage ban bill. The bill passed in the State Assembly earlier this year.

Today, CGA president Ronald Fong said in letter to the governor and in a statement: "Assembly Bill 1060 presents itself as feel good legislation but in reality is about punishing innovation and protecting union dues. Its target is one non-union grocer which utilizes an assisted checkout system as its primary form of finalizing customer sales."

Of course, supporters of the bill, which include the popular Mother's Against Drunk Driving (MADD) organization, think it's much more than "feel good" legislation.

The non-union grocer Fong is referring to is Tesco's Fresh & Easy Neighborhood Market, which offers self-service checkout only in its 159 stores, including the 98 in California. The other stores are in Metropolitan Las Vegas, Nevada (27 units) and Metro Phoenix, Arizona (34 stores.)

When the first version of AB 1060 was introduced by Assemblyman Hector De La Torre (D-South Gate), who's also the author of AB 1060, into the California State Legislature in 2008 as AB 523, Fresh & Easy Buzz named the legislation the "Tesco Fresh & Easy Law" because if it does become law, Fresh & Easy Neighborhood Market would be the only grocery chain in California that would be significantly affected by it since it's the only chain we're aware of that offers self-service checkout only. A number of other chains offer self-service checkout but do so as an option, along with having full-service checkout, in the stores. The fact CGA's Fong singled out the one grocer reinforces our point.

In using the term "assisted checkout," CGA president Fong is using the term Tesco's Fresh & Easy uses, because although checkout in its stores is self-service, a store clerk will assist customers with the process if it's requested.

Tesco's Fresh & Easy is a member of the grocer's association, which is headquartered in Sacramento.

Assemblyman De La Torre, the bill's author, has yet to publicly comment or issue a statement on the passage of AB 1060 in the State Senate.

Tesco's Fresh & Easy hasn't publicly commented on the legislation's passage in the State Senate yet either.

Meanwhile, Ronald Fong of the California Grocer's Association is one of the few voices so far urging Governor Schwarzenegger to veto the self-service checkout alcoholic beverage sales ban legislation.

"Current law places a grocer’s alcoholic sales license in jeopardy if inappropriate sales are identified through either the assisted [self-service] or traditional [full-service] checkout options," Fong says in asking the Governor to veto AB 1060. "Losing this license would seriously impact a retailer’s business. No retailer would put themselves in that situation," he added.

Further, Fong says: "Assisted [self-service] checkouts contain appropriate safety protocol including the system locking when any age-restricted product is scanned, requiring a clerk to verify age and sobriety, and when even slight variations in weight of product scanned and product bagged are detected. Grocers also utilize additional means to prevent theft or inappropriate access including security cameras, customer interaction throughout the shopping experience, staff training, strict inventory control protocols and the placement of both products and checkout stations themselves. California grocers take seriously their responsibility to ensure that only those individuals legally entitled to purchase alcohol do so in grocery stores. CGA fully supports efforts of the state’s regulatory agency to enforce existing laws regarding sales of alcohol. We encourage Governor Schwarzenegger to veto this unnecessary legislation," Fong concludes.

Our August 15, 2010 story [Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores] detailed two recent studies that supporters of AB 1060 used to help gain passage of the bill in the State Senate. Both of those studies question the argument that self-service checkout offers ample protection (Fong of the CGA's argument in his statement) in terms of preventing minors from being able to purchase alcoholic beverage items using the self-serve systems.

Apparently a majority of the California State Senate agreed with those and other arguments put forth by the legislation's supporters.

Now, however, it's all up to the Governor, who although a Republican is known for taking non-traditionally Republican positions, like his support for AB 1998, the single-use plastic carrier bag ban legislation currently in the Senate, which is also supported by the grocers' association.

For Tesco's Fresh & Easy Neighborhood Market, the Governor's decision is crucial. If the bill becomes law, it will mean at a minimum Fresh & Easy will have to have one full-service checkout lane in each of its stores - which we have said for nearly three years it should have anyway from a smart retail operations standpoint. The grocery chain doesn't want to do this because it thinks full self, or assisted, checkout is key to its success and ability to reduce labor costs extensively. Having self-service-only also is a key provision in avoiding unionization for Fresh & Easy.

Who would have though when Tesco first came to America in 2006 and decided to offer self-service checkout-only in its California, Nevada and Arizona Fresh & Easy Neighborhood Market stores - which is something it does in just one store, a Tesco Express unit, in its United Kingdom home base - the decision as to whether or not the grocer keeps that self-service-only system in its Fresh & Easy stores would end up being decided by a former world champion bodybuilder from Austria, turned Hollywood mega-movie star, turned Governor of California, named Arnold Schwarzenegger?

Related stories:

August 15, 2010: Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008 piece: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages

Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

News/Analysis


On August 4, California State Assemblymember Hector De La Torre (center at the podium above) and supporters held a press conference at the California State Capital in Sacramento to promote passage of AB 1060, which would ban the sales of alcoholic beverage items at self-service checkout lanes in California grocery stores. Above is a brief video of the press conference.

To paraphrase the late General Douglas MacArthur, who said in his farewell speech to the U.S. Congress in 1951, "Old soldiers never die; they just fade away," we say: 'In California, legislative bills don't always die; they just come back with new titles.'

Such is certainly the case at least with California State Assembly Bill 1060 (AB 1060), which was first introduced by Assemblymember Hector De La Torre (D-South Gate, Southern California) in the summer of 2008 as AB 523.

AB 1060, the bill formerly known as AB 523, is back - and it's been passed by the California State Assembly and is headed to the State Senate for debate. AB 1060 could get its first hearing on the Senate floor as early as Wednesday, according to De La Torre, it's author.

If passed by the California State Senate and signed by the Governor, AB 1060 will ban the sale of alcoholic beverages at self-service checkout counters in the Golden State's grocery markets, along with in any other format retail store offering adult beverages for sale.

The argument behind AB 1060 is that banning the sale of alcoholic beverages at self-service checkouts will help prevent the sale of liquor to minors. "We need to do everything we can to prevent alcohol abuse by minors," says Assemblymember De La Torre. "AB 1060 will ensure that all alcohol purchases are made through a face-to-face transaction with a cashier who can check proper identification - we currently require it for cigarettes, spray paints, and some over the counter drugs.

De La Torre has a fairly strong argument from a legal precedent perspective for AB 1060. As he mentions in the above quote, it's illegal for retail stores in California to sell cigarettes, spray paints and certain over the counter drugs like cold medicines containing Pseudoephedrine, which is used to make Methamphetamine, via self-service checkout. Instead, the products can only be sold to customers face-to-face by a clerk at a full-service checkout lane.

We first wrote about the legislation, then known as AB 523, in this July 14, 2008 piece: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.

In the story we called the bill - which is now AB 1060 - the "Tesco Fresh & Easy Law," not because the legislation was authored to directly target Tesco's Fresh & Easy Neighborhood Market, but rather because if passed it will require the fresh food and grocery chain to change the policy in its 98 California stores from self-service checkout only to having at least one full-service checkout lane, since AB 1060 requires all purchases of alcoholic beverages to be handled face-to-face by a store clerk at checkout.

The legislation if passed would have little if any affect on the state's other grocer's, since virtually every chain and independent in California that offers self-service checkout also offers the option of full-service as well in-store. Therefore, the "Tesco Fresh & Easy Law" coinage has a certain reality to it in that Fresh & Easy Neighborhood Market would be the only major grocery chain in California forced to make a serious operational policy change as a result of the law.

Tesco's Fresh & Easy offers what it calls "assisted self-service checkout" in its 159 stores located in California, Nevada and Arizona, by which it means customers scan and bag their own grocery purchases but can ask a clerk stationed at the front-end of the store for assistance if desired or needed.

AB 523, essentially the same bill as the current AB 1060, wasn't passed in the 2008 State Assembly session. De La Torre reintroduced the legislation about a year ago as AB 1060. The bill has sat in committee until recently, when the Assemblyman and his supporters breathed new life into the legislation, in large part based on two recent studies.

The studies

On August 4, 2010, De La Torre and representatives from San Diego State University’s Center for Alcohol and Drug Studies and San Diego's Metro United Methodist Urban Ministry held a press conference in Sacramento to release findings from two recent studies done by the groups regarding the selling of alcoholic beverages through self-checkout systems used at grocery stores.

The point of the studies was to determine how easy it might be for minors (under 21-years of age in California) to purchase alcoholic beverages using the self-service checkouts in grocery stores.

In the San Diego State University study, researchers sent participants into 216 grocery stores with self-checkout machines in five Southern California counties with the charge to attempt to defeat the safeguards built into the self-checkout machines which are supposed to prevent minors from being able to purchase alcoholic beverages using the self checkouts.

In about one out of every 10 instances, the self-checkout machine failed to lock up when alcohol was scanned so the purchaser could complete the transaction without any intervention from an employee, according to Dr. John Clapp, director of the University's Center for Alcohol and Drug Studies.

In addition to the machines not locking up, the study found that in 8.4% of purchase attempts through a self-checkout machine, study participants/shoppers were not asked to show their identification. Participants were aged 21-23, and were independently judged by a panel to be 23 years old or under, Clapp says.

California law requires self-service checkout machines to lock up whenever an alcoholic beverage item is self-scanned by a customer so the shoppers age can be verified. That's the safeguard the participants were instructed to see if they could defeat.

Clapp draws the following conclusion from the study: "Consistent with the recommendation of the U.S. Surgeon General, preventing underage drinking requires a zero tolerance policy for any system that potentially allows a minor or intoxicated person to purchase alcohol. Our study clearly showed that the self-checkout system has several vulnerabilities and could be a potential source for the illicit sale of alcohol to minors."

In the second study, conducted by the Youth Council at Metro United Methodist Urban Ministry in San Diego, a group of participants ages 21-23 were sent into 29 grocery stores in San Diego County with self-checkout machines and told to try to "game" the self-checkout systems, according to John Hughes, the executive director of the ministry group. Gaming the system in this case means being able to scan and purchase an alcoholic beverage item without the self-checkout machine locking up, as is required by California law.

The participants were able to successfully game the system 69% of the time, Hughes says. He says the study participants were able to fool the self-checkout system by scanning an item of equal weight, such as soda pop, and then bagging an alcoholic item. A variety of different items were used that easily worked to purchase alcohol undetected. All alcohol was paid for and all of the young adults who participated in the community assessment were over 21 and of legal age to purchase alcohol, according to Hughes.

Supporters

The two studies, along with key support from MADD (Mother's Against Drunk Driving), has fast-tracked the once languishing AB 1060.

"MADD believes we can help to reduce the threat of drunk drivers on our roads by stopping the sale of alcohol through self-checkout machines," says Gail Butler, MADD California State Executive Director. "MADD strongly supports AB 1060 to ensure that alcohol is sold in face-to-face transactions."

The bill has also picked up support from numerous California law enforcement officials, some who joined Assemblymember De La Torre at the August 4 press conference at the State Capital.

AB 1060 is also being supported by the United Food & Commercial Workers (UFCW) union, which represents about 1.3 million unionized grocery store employees and allied workers in the U.S. and Puerto Rico. UFCW representatives are currently lobbying legislators in Sacramento, urging them to support the legislation.

The UFCW, which counts California among its leading states in terms of union members, has been locked in a fight with Tesco for nearly three years over the union's desire to organize the grocery chain's store-level workers, as we've reported on and analyzed extensively on Fresh & Easy Buzz. [Click here to see our past stories on the issue.)

It also happens to be the case that the UFCW isn't crazy about self-service checkout in general, and particularly isn't crazy about grocers like Fresh & Easy that offer self-service only, because it reduces and eliminates the need for grocery checkers and baggers. As such, the union's support of the measure is obviously multi-layered: It supports AB 1060 because it's in favor of reducing sales of alcohol to minors, but it's also well-aware that the law would impact Tesco's Fresh & Easy directly if passed. That impact, which would as we've said require the chain to at a minimum add one full-service checkout lane in each of its stores in California, favors the UFCW's position.

AB 1060: An unintended favor to Tesco's Fresh & Easy

Ironically, in our analysis, the passage of AB 1060, which would force Fresh & Easy Neighborhood Market to operate at least one checkout in each of its California stores, would be a positive development for the grocery chain.

In this 2009 piece - March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track - we suggested seven operational changes Tesco needs to make at Fresh & Easy in order to help improve its sales and profits. Fresh & Easy has lost over half a billion dollars since it opened its first stores in November 2007.

One of those seven changes is that Fresh & Easy needs to add at least one, and more logically two, full-service checkout lanes in each of its 159 stores. (You can read our analysis in the March 7, 2009 story linked above.)

If AB 1060 becomes law, it will force Tesco to make such a change, adding at least one full-service checkout lane in its stores, which is something the grocery chain should have done long ago - and should do on its own today, in our analysis and opinion.

And although Tesco has yet to take our advice on this matter, it has recently taken one of Fresh & Easy Buzz's seven retail operations changes into account. In that same March 2009 piece our first of the seven suggestions was that Fresh & Easy Neighborhood Market accept WIC Vouchers in its stores. Last month Tesco began accepting WIC at its Central and Adams Fresh & Easy store in South Los Angeles and has additional stores slated to begin accepting the vouchers soon. [See - July 30, 2010: Fresh & Easy Neighborhood Market Store at Central & Adams in South Los Angeles is Now Accepting WIC Vouchers; Additional Stores to Follow]

Unintended consequences

We don't think having state legislators make retail operations policy for grocers is the greatest idea. But, ironically, if AB 1060 passes, leading to Fresh & Easy Neighborhood Market's creating at least one dedicated full-service checkout lane in each of its California stores, the term the "Tesco Fresh & Easy Law" will probably end up meaning the State of California passed a law, AB 1060, which actually forced Tesco to make a change - adding the full-service checkout lanes - that resulted in more satisfied customers and an increase in business at the 98 California Fresh & Easy stores.

Employees at the Glassell Park-Eagle Rock Fresh & Easy Neighborhood Market Store in Los Angeles Seeking Union Recognition From Tesco

A group of employees at the Fresh & Easy Neighborhood Market store (pictured above) at 4211 Eagle Rock Boulevard in the Glassell Park neighborhood in northeast Los Angeles, California, say they have or are close to having a majority of store workers in agreement that they want to join the United Foods & Commercial Workers (UFCW) union.

The store was one of the first six Fresh & Easy units opened by Tesco on November 8, 2007.

A number of the store's employees met with Tesco Fresh & Easy Neighborhood Market executives at corporate headquarters in El Segundo, California on March 26, and requested to be recognized as a union store. Tesco has thus far denied the Glassell Park store workers' request, which isn't uncommon for a company to do when employees make such a request informally.

The store employees are working with representatives of the Los Angeles UFCW union local to eventually hold an up or down vote of store workers to become a union shop. There are numerous steps that must first be taken, however. One of those steps was the attempt on March 26 of this year to get recognition from Tesco's Fresh & Easy.

Tesco's official position on becoming unionized is that "it's up to the Fresh & Easy employees" to decide if that's what they want. However, it's clear to those involved, as well as to close observers, that Tesco doesn't want Fresh & Easy unionized, which is a position they have a right to hold, just as other non-union food and grocery retailing companies like Walmart, Trader Joe's, Whole Foods Market and others do.

Additionally, at Tesco's annual meeting earlier this month, CEO Terry Leahy spoke out publicly for the first time we're aware of on the Fresh & Easy Neighborhood Market unionization issue, as we reported in this July 5, 2010 story - Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London.

Below (in italics) is the exchange at the shareholders meeting this month between the UFCW union's Dempsey and Tesco CEO Terry Leahy, as described in our July 5 piece:

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.

In the case of the group of employees at the Eagle Rock Boulevard Fresh & Easy store, who requested union recognition in March, it's obviously not the case not that they don't want to join the union.

Additionally, the Glassell Park/Los Angeles neighborhood store isn't the first one to request union recognition from Tesco Fresh & Easy Neighborhood Market's senior management, led by Tesco director and Fresh & Easy CEO Tim Mason.

That honor goes to the employees of the Fresh & Easy store at 16672 Beach Boulevard in Huntington Beach, California. The workers at that store requested recognition in mid-2008. [See - September 17, 2008: Store Workers at Huntington Beach Fresh & Easy Demand Union Recognition From Tesco Fresh & Easy Neighborhood Market and October 2, 2008 Tesco Fresh & Easy Denies Huntington Beach Store Employees Request to Be Recognized As A Union Store; Next Step Likley to Be Open Ballot Election] No employee open ballot election has yet taken place at the Huntington Beach Fresh & Easy market.

On September 26 we reported in this story - "News & Analysis: Employees At Two More Fresh & Easy Grocery Stores Could Soon Request UFCW Union Recognition From Tesco's Fresh & Easy," - that workers at two additional Fresh & Easy stores were in the process of preparing to request recognition as a union shop. The Glassel Park neighborhood Fresh & Easy market at 4211 Eagle Rock Boulevard in Los Angeles is one of those two stores. It's been nearly two years since our report but the store workers' have persisted in working towards their goal.

The employee group at the Glassell Park Fresh & Easy store appears determined, working with the UFCW, to fight to become a union shop. In fact, store workers have been working to build support among numerous customers and members of the neighborhood as part of their campaign.

The UFCW local, working with the employees, is also putting a significant amount of its organizational energy into the campaign to obtain recognition from Tesco for the store.

The union believes the key to unionizing Tesco's Fresh & Easy Neighborhood Market is to get at least one store recognized as a union shop, based on the majority of the store's workers agreeing to be unionized. Once that happens, union representatives think other stores will fall in a domino-like fashion. But it's been a hard slog. And it's far from universal among the employees at the 159 Fresh & Easy stores that they desire union representation.

However, we've been covering the Fresh & Easy unionization issue since the beginning, in late 2007. And the employees at the Glassell Park store are among the most determined group of workers we've seen thus far in terms of being determined to obtain union recognition from Tesco's Fresh & Easy Neighborhood Market.

[Reader Resources: Readers, Click here and here to read past stories in Fresh & Easy Buzz on the Tesco Fresh & Easy Neighborhood Market/UFCW union topic and issue. Use the "Older Posts/Newer Posts" links at the bottom of the pages to view additional pages/posts. Also, note the story links at the end of various stories.

An additional aspect of the UFCW union-Tesco Fresh & Easy Neighborhood Market unionization topic and issue involves the bringing of labor law violation cases before the National Labor Relations Board (NLRB) by the union and two Fresh & Easy store employees. The UFCW also brought a case against Fresh & Easy's meat supplier, 2 Sisters Food Group, which was privately-owned but was recently bought out by Tesco. See our stories about each of these cases below:

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

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

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

Tom & Jane Plus Others Discuss Unionization at Tesco's Fresh & Easy Neighborhood Market

On June 30, 2010 we published this piece - Tom & Jane Plus Two Discuss Unionization at Fresh & Easy Neighborhood Market - about a discussion on the Fresh & Easy Neighborhood Market Facebook site about whether or not the non-union food and grocery chain should be unionized.

Tom, (who's not an employee of Fresh & Easy) and Jane (who is an employee of Tesco's Fresh & Easy Neighborhood Market) are the two most active discussion members, hence we used their names in the story's title. Well, and... the names also made for a good sounding headline, despite the similarity to John and Kate plus...

Since we ran the piece, the union/non-union discussion on the Facebook site has gotten more interesting - and richer - with additional folks joining in, including other Fresh & Easy employees. Tom and Jane have added additional comments as well.

You can view - and read the additional comments - the ongoing discussion on unionization at Tesco's Fresh & Easy Neighborhood Market here.

Feel free to offer you own comments on the topic and issue on this post or on our June 30, 2010 post linked above - and below.

Related Stories & some background on the issue:

>June 30, 2010: Tom & Jane Plus Two Discuss Unionization at Fresh & Easy Neighborhood Market

>Read a history of our coverage of the UFCW union-Fresh & Easy Neighborhood Market topic and issue here. Click the "older posts" link at the bottom of the first linked page to see additional pages.

>Most recently we reported and published a series of stories about Tesco, Tesco's Fresh & Easy Neighborhood Market, the UFCW union, and labor-related issues and legal cases involving two of the chain's stores and one of its two suppliers - 2 Sisters Food Group - which Tesco recently bought and has taken over. See the stories below:

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]

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

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

>Additionally, Fresh & Easy Buzz recently reported on Tesco plc director and Fresh & Easy Neighborhood Market CEO Tim Mason's 2009 comphensation package. See the stories below:

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 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.

April 23, 2009: Tesco PLC Director and Fresh & Easy USA CEO Tim Mason Sells Over 631,381 Tesco Shares Yesterday For $3.2 Million Payday

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.

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.]

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.