Tesco, the world's No. 3 retailer, survived a shareholder rebellion over executive pay on Friday, when 47% of investors either voted against or abstained in a poll over remuneration at its annual meeting.
The British supermarket group said its executive pay report, including a package worth over 5 mln pounds for outgoing chief executive Terry Leahy and a big bonus for Tim Mason, the head of the group's loss-making U.S. business, was endorsed by 53% of shareholders in the poll.
Some 32% voted against, while a further 15% abstained, according to the final results of the poll published on the Regulatory News Service.
"The extraordinary opposition vote reflects investor outrage over the excessive pay awarded to Tim Mason, Tesco's second highest paid executive, despite the dismal performance of the U.S. Fresh and Easy business he oversees," said Michael Garland, a director at CtW Investment Group, a U.S. lobby group which had urged shareholders to oppose the pay report.
The vote is the latest in a series of investor protests against pay in boardrooms, though few have succeeded in forcing change. British clothing and food retailer Marks & Spencer is expected to come under fire at its annual shareholder meeting on July 14 for its 15-mln-pound pay package for new chief executive Marc Bolland.
Tesco, which saw off a similar-sized rebellion against its executive share options last year, played down the protest, arguing that the 45 rise in total board pay was well below a 10 percent increase in annual underlying profit.
"The broad conditions are right, so I think the discussions (with shareholders) will be about some relative minor aspects," CEO Leahy told reporters, adding that Chairman David Reid would meet with investors to discuss any grievances.
Most of the criticism at the meeting was over Mason's 4- million-pound-plus pay package at a time when Fresh & Easy is heavily loss-making and has not given a target of when it expects to break even.
However, Mason and other executives were all re-elected to the board with majorities in excess of 90%.
ACCOUNTING POLICIES
Leahy said shareholders were "clearly happy" with Tesco's performance, and was warmly applauded when thanked by Reid for his 13 years at the helm of the business.
The shareholder meeting lacked the colour of recent years, which have featured animal rights activists dressed as chickens and placard-waving union protestors.
Management spent much of its time fielding questions from small investors about issues ranging from the labelling of goods from Israel to the state of disabled toilets in a London store.
It also vigorously defended the group's accounting policies, after a report by Citigroup analysts this week argued its 2009-10 profits would have been about 800 million pounds lower if it had used policies comparable to its main rivals.
Reid said there were "serious inaccuracies" in the analyst note, and he was "absolutely satisfied that our accounting policies are appropriate".
He said finance director Laurie McIlwee was taking up Tesco's concerns about the note with its authors, although Leahy later played down the issue.
"That's their job, to write reports. It doesn't mean they're right. I might write a report about Citigroup," he joked.
By mid-Friday, Tesco shares were up 1.5% at 383.3 pence, outperforming a 1.2% rise on the UK's benchmark FTSE-100 index.
