Tesco bosses told: 'end profit fall or no bonus'

British supermarket giant rethinks pay strategy as it seeks to regain market share

PUBLISHED : Saturday, 25 May, 2013, 12:00am
UPDATED : Saturday, 25 May, 2013, 2:53am

Senior managers at the British supermarket chain Tesco will only receive bonuses if they manage to reverse the grocer's declining profits, according to the group's annual report last week.

Chief executive Philip Clarke and his management team missed out on a bonus and other long-term incentives last year as profit at Britain's largest supermarket company fell for the first time in two decades.

"Our financial performance fell short of where we wanted it to be," Stuart Chambers, chairman of Tesco's remuneration committee, said in the report. In future and in accordance with new guidelines, bonuses will only be paid if profit has grown.

Clarke plans to dump the Fresh & Easy chain in the United States and is retreating from international markets and reducing Tesco's domestic store expansion as the company struggles to maintain its dominant share at home. Last year it invested £1 billion (HK$11.72 billion) revamping stores and training staff as it seeks to win customers back from discounters such as Aldi and more upmarket chains such as Waitrose.

To reflect Tesco's "fundamentally different approach to space going forward", the company said in the report, it will base future pay awards on trading profit rather than so-called underlying profit, as trading profit does not include property gains.

Tesco said last month that it would scrap 100 planned major store developments. Instead it will focus on expanding its online and convenience-store operations as it seeks to regain lost market share.

Under the new remuneration plan, annual bonuses will be "less heavily weighted towards short-term profits, but linked to a more balanced scorecard of financial, strategic and operational measures", according to the report.

All the same, if maximum targets are met, Clarke can earn as much as £7 million.