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Last Updated: Tuesday, 20 May, 2003, 18:47 GMT 19:47 UK
Tesco targeted over 'fat cat' pay
Tesco store
Tesco: Next in line after GSK?
A shareholder lobby group has attacked supermarket group Tesco's executive pay policies, one day after investors sensationally voted against a lucrative pay deal for the boss of drugs firm GlaxoSmithKline.

Pension Investment Research Consultants (PIRC) criticised Tesco's rolling two-year contracts for directors, saying they raised some of the same issues as GSK's controversial pay policies.

Shareholder activists argue that two-year contracts maximise "rewards for failure" because they oblige firms which dismiss underperforming executives to pay them larger than usual severance packages.

"We would argue that the Tesco remuneration package is overgenerous and has inadequate performance targets," PIRC research director Stuart Bell told Reuters.

Mr Bell also criticised high street bank HSBC, saying its contract with director William Aldinger would entitle him to up to $30m (18m) in the event of his dismissal.

Investor returns

A Tesco spokesman said the company planned to appoint all new directors on one-year contracts, but would retain its existing two year contracts as these were negotiated "in line with best practice at the time."

"We find it strange that we're being compared to GSK. We have delivered consistently strong returns to shareholders," he added.

Investor resentment over GSK's pay policies, which would have entitled chief executive Jean Pierre Garnier to a pay-off of between 10m and 22m, was heightened by the firm's poor performance in the three and a half years since Mr Garnier took over.

During that time, GSK's share price has lost about a third of its value amid concerns that it has failed to develop best-selling new drugs.

Pay review

GSK said it had called in City accountants Deloitte & Touche to review its pay policies after a majority of shareholders voted against its executive pay packages on Monday.

It was the first time that shareholders had voted down pay proposals at a British company, and marked the high point of a tide of shareholder resentment over fat cat pay in recent months.

The shareholder vote is not legally binding, but the company is thought unlikely to ignore such a stark warning from its owners.

GSK chairman Sir Christopher Hogg said Deloitte & Touche would review "all aspects of remuneration, including those to which we are bound contractually."

Several other firms, including insurer Royal & Sun Alliance, oil giant Shell, and Barclays bank have all faced significant shareholder dissent over executive pay in recent months.

Tesco shareholders will have an opportunity to vote on the company's pay policies at its annual general meeting on 13 June.




SEE ALSO:
Q&A: Glaxo pay vote
20 May 03  |  Business
Glaxo boss hints at pay review
20 May 03  |  Business
Glaxo defeated by shareholders
19 May 03  |  Business
Shareholders put GSK under pressure
19 May 03  |  Business
RSA hit by 'fat cat' pay revolt
14 May 03  |  Business
Glaxo backs down on CEO pay deal
26 Nov 02  |  Business


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