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Last Updated: Tuesday, 20 April, 2004, 07:17 GMT 08:17 UK
Profile: Tesco chief Sir Terry Leahy
By Jorn Madslien
BBC News Online business reporter

Tesco chief executive Terry Leahy
Sir Terry's meteoric rise has earned him much respect

It is quite a paradox that perhaps the most respected business leader in the land has found himself under fire - not from competitors, consumers or the authorities, but from the owners of the company he runs.

Early this month, Tesco's chief executive Sir Terry Leahy was forced to bow to shareholder pressure and accept that his two year service contract was cut to one year rolling contracts.

The move followed last year's annual general meeting where 40% of shareholders voted against or positively abstained from the vote on the length of Sir Terry's notice period.

Shortening notice periods is seen as a crucial step towards making it easier for shareholders to sack failed executives without having to kit them out with golden parachutes.

But in the case of Sir Terry, such shareholder activism can easily be seen as ungrateful given his skills at making money on behalf of investors.

Certainly, Sir Terry - who is seen as a tough and blunt operator - seemed to think so.

At the time he appeared reluctant to accept changes to his arrangement and stressed the importance of honouring contracts.

Strong performance

Sir Terry joined Tesco straight after graduating from the University of Manchester Institute of Science and Technology (UMIST) in 1979.

Tesco's share price has risen steadily during the past year
He entered the supermarket chain as a marketing executive, was appointed to Tesco's board of directors in 1992, and by the time he was 40 he had worked his way up to become chief executive in 1997.

Under the stewardship of the now 48-year-old supermarket boss, Tesco has built its share of the UK market to 24%, and at least one in every eight pounds spent with a UK retailer now ends up in Sir Terry's coffers.

In addition, the retailer has expanded dramatically in new markets, both geographically and in terms of products and segments.

Tesco's international expansion has given it a presence in 11 markets in Ireland, Eastern Europe and Asia.

While in the UK, an acquisition spree into the convenience stores market - where it recently snapped up Adminstore, owner of Europa, Harts and Cullens - has given it a strong urban foothold in London.

The stores are due to be re-branded Tesco Express.

New markets have also been reached through ventures such as its recent push into DVD rentals, and Tesco's website is filled with a variety of offers ranging from cheaper home telephony and insurance or finance deals, to holiday and flight offers.

Tesco's Extra hypermarkets - which sell clothes, furniture and electrical goods - also help the chain's push into the 100bn non-food market where the grocer already commands a 5% market share.

Its presence in the non-food market is growing fast, thanks to products such as its 4 jeans, as well as to Tesco's non-food boss Richard Brasher who wants his division to rival the food part of the group.


Sir Terry's many initiatives have so impressed investors, the Tesco share price outperformed the market by 13% last year, rising from less than 2 a year ago to more than 2.50.

My brothers all left school at 16 but my parents worked very hard so that I could stay on and do my A-levels
Sir Terry Leahy, Tesco chief executive
And shareholders have not been the only ones to benefit.

Tesco employees receive frequent invitations to join a save as you earn scheme.

Staff save a fixed sum of up to 250 a month for up to five years.

At the end of their determined savings period, they get the money back along with an option to buy Tesco shares at their market price when their individual schemes started.

Such options are obviously only attractive if the share price has risen over the last, say, five years - in which case the workers are free to sell the stock and cash in the profits.

Sir Terry has also been handsomely rewarded.

Last year alone, that is during the 2002/03 tax year, he was paid 3.76m - that is his 916,000 basic salary plus bonuses


Outsiders have been impressed too.

In January, he was names European Businessman of the Year by Fortune magazine, soon after Management Today named him the most admired leader in the UK.

But Sir Terry's business methods are not universally popular.

Tesco store
At least one in eight pounds spent with retailers end up with Tesco
In February, the small supermarket chain Proudfoot - which is run by a family in Withernsea, North Yorkshire - asked the Office of Fair Trading to launch a probe into what it called "predatory pricing".

And Tesco's 54m acquisition of Adminstore was also referred to the Office of Fair Trading, with both supermarket and convenience store rivals urging the complaints authority to scrap the distinction between supermarkets and convenience stores.

The problem they are faced with, however, is one of customer preference: Tesco Express is cheaper than many traditional convenience stores - in part due to Tesco's tremendous buying power - and consumers like that.

Local hero

Sir Terry was knighted in 2002, soon after having received the honour of the Freedom of the City of Liverpool which entitles him, amongst other things, to herd his sheep across the city without being arrested.

Quite an honour for a local boy who, according to Liverpool Post "grew up in a pre-fab maisonette on Endbrook road in the Lee Park council estate in Belle Vale".

Sir Terry was the third of four brothers, and the only one to get any higher education.

"My brothers all left school at 16 but my parents worked very hard so that I could stay on and do my A-levels [at the local grammar school St Edwards College]," Sir Terry is quoted on his former university's website.

Sir Terry, who remains an Everton supporter, has decamped to North London where he lives with his wife Alison and their three children.

Tesco boss gets shorter contract
07 Apr 04  |  Business
Tesco faces Adminstore challenge
04 Apr 04  |  Business
Tesco 'planning Chinese purchase'
04 Mar 04  |  Business
Tesco snaps up Cullens and Europa
22 Jan 04  |  Business
Tesco reveals healthy Christmas
13 Jan 04  |  Business
Tesco races ahead as sales soar
25 Nov 03  |  Business
Tesco wins pay battle
13 Jun 03  |  Business

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