// Tesco faces shareholder revolt over bonus hike for CEO Dave Lewis
// If it kept Ocado on list of competitors used to assess performance, Lewis’ bonus would be reduced from £2.4m to £800K
// Glass Lewis, the governance adviser, had “severe reservations” over the decision to exclude Ocado
Tesco is reportedly facing a shareholder revolt after the Big 4 grocer inflated executive bonuses by axing Ocado from a list of companies used to assess its performance.
According to the Sunday Times, Glass Lewis – the governance adviser – said it had “severe reservations” over the decision to exclude the online grocer’s from calculations.
Tesco chief executive Dave Lewis was recently handed a £6.42 million pay package for the year ending March, marking the highest annual pay packet for an executive at the grocery giant since the departure of Sir Terry Leahy in 2011.
Lewis’ total pay increased by more than a third last year due to a leap in annual and long-term bonus payouts.
His basic salary alone is 355 times that of the lowest-paid average employee.
Of its total pay package, Lewis received a £2.4 million annual cash bonus and another £2.4 million long-term share bonus on top of £1.6 million in basic salary and benefits.
However, if Tesco had kept Ocado on a list of competitors used to assess its performance, it would have underperformed by 4.2 per cent – therefore reducing Lewis’ annual bonus from £2.4 million down to £800,000.
The grocery giant’s board compares its performance and total shareholder returns with a group of comparable competitors over a three-year period to calculate long-term rewards.
With Ocado not on the list of competitors, Tesco appears to have outperformed them by 3.3 per cent.
Tesco previously said it was “fair and proportionate” to exclude Ocado as it no longer deemed it a “direct competitor”, arguing it had shifted significant from grocery deliveries towards a “technology strategy”.
Glass Lewis questioned the decision to exclude Ocado and is reportedly advising Tesco investors to vote against the remuneration report at next month’s AGM.
The influential lobby group argued that such “discretionary” actions “undermined the idea of transparent, target-based pay”.
Glass Lewis also argued that food delivery remained a core part of Ocado’s business and was its main source of revenue in 2018 and 2019.
Tesco was also recently forced to defend a decision to pay a £635 million dividend to shareholders while accepting a similar-sized tax break from the government’s emergency coronavirus support package.