Payouts to former Tesco boss Sir Terry Leahy since retirement top £8m

Former CEO has received two tranches of three-year-performance payouts, despite doubts about his legacy

Sir Terry Leahy, the Tesco chief executive who led the supermarket group for 14 years before retiring two years ago, has received almost £8.5m in performance-based payouts since his departure.

The payments, revealed by a Guardian analysis of share awards no longer disclosed in Tesco annual reports, comes against a backdrop of writedowns, profit warnings and mounting criticism of Leahy's strategic legacy. Last year the company revealed its first profits fall in two decades; Fresh & Easy, Leahy's foray into the US, is being scrapped at a cost of £1bn; and £800m has been wiped off the value of the land bank built up by the former chief executive.

The Guardian study found Leahy had received two tranches of three-year-performance payouts worth £2.95m since departing. Tesco's remuneration committee, chaired by Stuart Chambers, has judged the performance targets to be met, or partly met.

In addition, shares worth £5.47m have been released to Leahy from Tesco's "executive incentive scheme" since his departure. These were deferred annual bonus rewards, held by the company for three years before being released to executives. In Leahy's case, however, the release schedule was accelerated because of his departure.

These rewards were not assessed on performance criteria, but the final batch were subject to a "clawback" clause, designed to prevent payments for failure. However, Tesco said clawback was not relevant to Leahy payouts as it was only triggered by a "material misstatement" in Tesco's accounts.

The bulk of the £8.42m in performance bonuses received by Leahy since leaving were paid out between February and July 2012. During that period the company was still reeling from a shock January profits warning that wiped 16%, or £5bn, off the share value of the group in one day. It was reportedly the biggest fall in the stock since Black Monday, during the stock market crash of 1987.

Terry Leahy, former CEO of Tesco. His tenure included the failure of the supermarket group's foray into the US, Fresh & Easy.Shares have recovered some ground , but the stock is still 16% below the price when Leahy departed in March 2011. Meanwhile, over the same period, the wider FTSE 100 index has climbed 6.8%.

Leahy also took with him an £18.4m pension pot when he stood down. In addition he held options over almost 7m shares – all now unlikely to produce a windfall because of the share price slump and the scrapping of Fresh & Easy.

A Tesco spokesman confirmed the Guardian analysis of post-retirement performance payouts to Leahy was accurate. "These awards were made during Terry Leahy's time as Tesco chief executive," he said. "They were awarded and vested in line with the performance criteria set for them. No new awards will be made to Terry Leahy."

In its latest annual report Chambers said the remuneration committee had strengthened performance criteria "to ensure that they remained motivational for management while still representing long-term value creation for shareholders".

The full extent of the re-evaluation of Leahy's legacy was laid bare at the supermarket group's annual shareholder meeting last week when his predecessor Lord MacLaurin, attending as an ordinary shareholder, delivered a swingeing attack from the floor.

"I think you would probably agree with me that when you judge the performance of a chief executive, you not only judge the performance of his day-to-day operation, but you also have to judge his legacy and I think we're all very sad to see the legacy Sir Terry Leahy has left," he said.

MacLaurin later told the Guardian Leahy had "lost the plot", and that the US venture was a "disastrous" enterprise he had counselled against – even though it was to be run by his son-in-law Tim Mason.

He added: "It's also unforgivable that he [Leahy] took money out of the UK business and allowed it to flounder when our rivals were catching up and expanding."

Leahy's successor Phil Clarke – who still occasionally takes informal soundings from MacLaurin on Tesco business – has shied away from direct criticism of his immediate predecessor. However, he has said "the strategy wasn't delivering", claiming Tesco had been "running up the down escalator" with its focus on land purchases.

"Space growth is too fast. More very big stores aren't the answer any longer," he said last April. "Customers are moving faster to smaller stores and to the internet." He promised to "strike a better balance between growth and returns for shareholders".

Two years ago Leahy had appeared to retire on a high when he was feted by outgoing chairman David Reid as "undoubtedly one of the leading businessmen of his generation … [who] has put in place a strategy which can secure the progress of Tesco for years go come."

Former Asda boss Allan Leighton, for a long time an arch rival, also paid tribute. "The test of all great leaders is the legacy they leave. Terry Leahy inherited a company that was the best food retailer in Britain … He has made it into the best food retailer in the world."

No one appeared more sure of Leahy's achievements than himself. "In every business the chief executive wakes up in the morning wondering where the growth will come from," he reflected in valedictory remarks. "And we have answered that question at Tesco."

Article Source : http://www.guardian.co.uk

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