Tesco’s “collegiate” approach to executive pay, announced in this week’s annual report, was greeted with cynicism by some media commentators, suggesting it would continue to give executives running loss-making divisions an ‘easy’ ride.
But it’s a cheap shot. The new scheme is not only more simple, but clearly aligns all executives not to nebulous individual targets about which shareholders don’t give a stuff, but earnings per share, and return on capital the metrics on which investors make their decisions.
Tesco’s share price hasn’t budged for three years as shareholders remain unconvinced about the return on Tesco’s heavy investment in capital (ie new stores), both here and abroad. Maybe now it will. (And the latest Kantar numbers will help too.)
You’ve also got to wonder at the carping of commentators over Tesco’s ‘millionaire grocers’. In the week Sir Stuart Rose questioned the growing disparity between executive pay and regular employees, Tesco is going against the grain. In contrast, the CEO of British Gas was paid £28m last year, as gas bills soared.
And talking of tactless, Kraft boss Irene Rosenfeld earned a 41% pay rise to $26.3m for doing the Cadbury deal.