By Mark Kleinman, City Editor
Leading shareholders in Tesco are demanding changes to the company's boardroom pay practices as it prepares to terminate its loss-making American misadventure.
Some of the retailer's biggest investors are keen for Tesco to introduce more stringent clawback measures that would allow it to more easily reclaim bonuses paid to executives for past performance.
Tesco will confirm plans to withdraw from the US market alongside its annual results on Wednesday. The closure or sale of Fresh & Easy is expected to incur a charge of approximately £1bn, in addition to similar losses already accumulated at the six year-old business.
According to last year's annual report, the supermarket group's existing pay policies enable it to exercise "clawback for deferred share awards under the annual bonus plan and long-term incentive (PSP) awards to allow the committee to scale back awards in the event that results are materially misstated."
However, the "material misstatement" of results covers a narrow set of circumstances that many shareholders believe should be broadened to encompass situations such as Tesco's US withdrawal.
Deferred shares worth more than £11m awarded to Sir Terry Leahy, the former chief executive, will be forfeited because of the decision to abandon Fresh & Easy, The Daily Telegraph reported today.
Philip Clarke, Sir Terry's successor, and other senior colleagues are also expected to miss out on bonuses for 2012 as a consequence of the US failure.
"The company is taking a very substantial hit on this," one leading shareholder said. "It is not enough to simply not award potential bonuses. An element of past bonuses also need to be clawed back."
The sentiment from investors is unlikely to escalate into a full-blown row with Tesco over its pay policies at the retailer's annual meeting, but it highlights the extent to which shareholder groups want clawback to become an entrenched feature in executive contracts beyond the banking industry.
Tesco declined to comment.
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