‘Drastic’ Dave Lewis may have taken over Tesco on September 1 2014, but his disgraced predecessor Philip Clarke was still around if called for until January 19 this year – and paid £764,000 for his troubles.
Clarke quit (/jumped before he was pushed) last July, but was still ‘available to support the transition’ to Lewis, who was announced as his replacement the same day. That meant he was paid his salary of £1,145,000 plus ‘relevant benefits’ until January (Tesco’s financial year runs until the end of February), according to the supermarket’s annual report, published today.
He’s also still got some share awards he can exercise until January 19 2016, although 2.1 million options granted from 2006-2009 are, er, ‘currently underwater’. Performance-based awards worth £1.14m from 2008 and 2009 are still live and kicking, though.
That’s all on top of a £1.2m golden goodbye’ (a year’s salary plus benefits) Tesco tried and failed to withhold from Clarke, but has said it will claw back if it turns up any ‘gross misconduct’ in the future. Add to that that a £263m profit overstatement was uncovered mere weeks after Lewis taking over and it seems pretty unlikely that the ex-chief exec was around much to ‘support’ his successor.
A similar pattern played out for Laurie McElwee, who quit as CFO in April 2014, but was on Tesco’s books with a salary of £886,420 until October and got his own silver see-off of £0.97m. He also has almost 40,000 performance-based shares awarded in 2011/12 he can cash in from next week.
And let us not forget the new guys. Lewis and McElwee’s replacement Alan Stewart had to be bought out from Unilever and Marks and Spencer to the tune of £3.3m and £1.9m respectively, taking their total pay to £4.1m and £2.3m each. Phew.
Getting rid of execs – and prying their replacements away from their old employers – is a drop in the ocean, of course, compared to something like Tesco’s record £6.4bn annual loss. But pay is a perennial popular pain-point even for well-performing bosses. Company boards ought to craft contracts with less lucrative farewells.
But it’s easier said than done when incoming execs will have their own team of hard-nosed lawyers - and when one has to broach the oh-so awkward conversation of what happens if everything goes tits up.