Tesco, the supermarket giant, is in under before its scheduled AGM next week regarding the “excessive” almost-£5m pay package that it gave its CEO for the 2017/18 financial year.
Dave Lewis, the CEO of Tesco, took home a base salary amounting to £1.25m, as well as a £971,000 in shares that comes from a long-term incentive plan, a short-term bonus of £2.28m, and pension contributions and some additional benefits which brought his pay to a total of £4.87m.
However, Pirc, a shareholder advisory group, is recommending that the investors vote down the remuneration report of Tesco, which it believes to be unreasonably excessive.
In a note to its clients, Pirc stated: “The salary of the CEO is considered to be the highest when compared to salaries of other CEOs in the peer group.”
It added: “This raises concerns about the potential excessiveness of the remuneration structure, as incentive awards are directly linked with salary levels.”
The group explained that it considered the bonus awards, which together amounted to 260 percent of the salary of Lewis, to be too large. It also said that the ratio of the pay of Lewis to the average employee’s – which currently stands at 267:1 – is “unacceptable”.
Pirc claimed that the pay of Lewis continued to increase over the past five years and was raised to more than 17 percent over the past year. The group said that it was also out of whack with the value that Tesco has been creating for shareholders.
The firm stated: “Over the five year period average annual increase in CEO pay has been approximately 50.34 per cent whereas, on average, total shareholder return has decreased by 7.84 percent.”
Pirc also said that shareholders should vote down the amended remuneration policy, which will allow the maximum potential awards under all the incentive schemes to amount to 600 percent of salary which they considered to be “highly excessive.”
John Allan, the chairman of Tesco, did not escape the criticism of Pirc. Once again, the group advised against his re-election, as Pirc has continually claimed that he holds too many senior jobs and that he may not have enough time to commit to them. Allan also serves as the chairman of housebuilder Barratt Developments.