Tesco said it will seek recovery of the termination payment made to former Chief Executive Officer Philip Clarke should gross misconduct be determined following the discovery of an accounting black hole.
Money paid to Laurie McIlwee, the former chief financial officer, will also be pursued in such circumstances, the UK grocery leader said in its annual report Thursday.
Clarke, who was replaced as CEO in September prior to the disclosure of a £263 million profit overstatement, received a £1.22 million payoff in February. Also at that time, McIlwee was handed about one million pounds. Tesco, which initially withheld the payments amid an internal review, hasn’t made any allegation of wrongdoing against either individual.
The UK’s Serious Fraud Office began an investigation into the profit overstatement almost seven months ago. Tesco shares have dropped 26 per cent in the past year.
The annual report shows that Clarke’s successor Dave Lewis was paid £4.1 million in his first six months as CEO, including £3.3 million pounds for forfeiting incentives due from previous employer Unilever.
Alan Stewart, who joined as finance chief in September, received £2.3 million pounds through February, including £1.9 million to compensate him for incentives forsaken at Marks & Spencer.
Tesco has shifted its bonus structure this year to prioritise sales growth over profit, the annual report also shows. Half of Lewis’s annual payout will be determined by sales growth and 30 per cent is linked to trading profit. Last year, half of Clarke’s bonus was determined by earnings, with only 18 per cent of the amount determined specifically by sales.
The payout can reach a maximum of 250 per cent of Lewis’s base salary, Tesco said.
"To deliver turnaround performance, top-line revenue growth is fundamental and will be the foundation to ensuring sustainable levels of profit in the future,” the grocer said.
News by Bloomberg, edited by ESM
