The former boss of Tesco's failed US chain Fresh & Easy has received a £1.7m payoff despite the business being shut down after repeated losses.Tim Mason, United Nations agency departed in Dec after 30 years at the cluster, was awarded "liquidation damages" corresponding to his annual remuneration and a sum up to his average bonus over the past 2 years.Tesco declared last month it would exit the us after wrenching up total prices of £1.5bn. contemporary & simple opened in 2007 however ne'er made a profit.
Tesco's checkout staff, meanwhile, learned that their annual shares bonus pot has been halved after the retailer's first fall in annual profits in almost 20 years. Around 280,000 UK staff will receive a total of £56m in shares, down from £110m a year earlier and worth a maximum per worker of £1,625.
On top of his payment for "loss of office", Mason also earned a £691,000 salary and received £400,000 in benefits last year. He had built up a £10.4m pension, and owns more than 1m shares, worth around £4.1m. He also has options on a further 1.15m shares, and will be paid £100,000 in "repatriation costs" to return to the UK.
The retailer's disappointing performance meant that around 5,000 top managers, including chief executive Phil Clarke, missed out on a bonus and long-term shares awards for last year. Clarke received salary and benefits worth £1.2m, 1.4% higher compared with a year earlier. The total pay of finance director Laurie McIlwee fell 19% to £917,000.
Pre-tax profit halved to £1.96bn in the year to 23 February. As well as taking a hit on the US business, Tesco also made a UK property writedown of £804m, after abandoning plans to develop more than 100 sites.
"The year just ended was a challenging one," said Stuart Chambers, chairman of the remuneration committee, in the report. "Our financial performance fell short of where we wanted it to be, which in turn resulted in no annual bonus being paid to the senior management team for 2012-13. The long-term incentives that were due to vest this year also lapsed as performance targets were not met."
Tesco bosses will only receive an annual bonus in the future if profits grow. The retailer also said, however, that future bonuses would be less focused on short-term profits than in the past, and more focused on other "strategic and operational" measures, including customer service and colleague "engagement".
In terms of financial measures, the level of bonuses will be determined by internet sales, like-for-like sales, and working capital as well as profits.
Chambers said that a number of factors had weighed on the company's financial performance, including its decision to reinvest profits in the UK business to improve the shopping experience for customers, and the closure of Fresh & Easy.
He added that "external challenges", including a weak economic backdrop in central Europe and the regulatory restrictions on opening hours in South Korea, had also had an impact.
He said that the senior management's failure to earn a bonus and long-term incentives showed that Tesco's remuneration policy was "effective in aligning pay with performance."
Richard Brasher, the former head of Tesco's UK business, who was squeezed out in March 2012 after just a year in the job, also received a golden goodbye. He was paid "liquidated damages" of £1.3m.
At the time of his departure Clarke said he was taking control of Brasher's UK operation in addition to his duties as group chief executive.
Clarke said in the report that Tesco would more focused in the future on growth, consuming less capital, and generating more free cash flow.
"Making this transformation in all its aspects will of course not be without its challenges – and the clearest evidence of this can be seen in the first reduction in profits of the group for two decades, which we reported on in April," he said.
"Everything we are doing reflects my determination to deliver shareholder value, an appropriate balance between investing for future growth, and delivering sustainable returns for our shareholders."
