Tesco PLC 13 June 2019
Fraud InvestigationThe deferred prosecution agreement (DPA) entered into by Tesco states that there was false accounting at Tesco Stores Ltd. in 2014 and names the former executives, Carl Rogberg, Chris Bush and John Scouler, as involved in "falsifying or concurring in the falsification of accounts." However, all three former executives have now been acquitted. Please see the attached report for further details.Equal Pay ClaimThe claim has been brought by law firm Leigh Day which claims it could apply to more than 200,000 employees of the Company with estimated pay shortfalls of as high as £20,000. The claim has been brought under the Equality Act 2010 which only requires that a claimant can compare themselves to a member of the opposite sex earning more in a role they believe is of equal value to theirs. In distribution centres, where employees are mostly male, staff can earn in excess of £11 an hour where pay for store staff, who are usually women, is commonly around £8 an hour.
Item 2: Approve the Remuneration Report The remuneration structure is unsatisfactory. The Company has increased the maximum LTI award from 250% of base salary, which was equal to the maximum bonus, to 275%. Although pay is now weighted toward the long-term, it would have been preferable to reduce the size of the bonus, which exceeds our limit of 150%. Furthermore, the Remuneration Committee adjusted the LTIP targets during the year, which does not meet best practice. We recommend shareholders oppose.
Items 17 and 18: To reappoint Deloitte LLP as auditor of the Company and authorize the Board to approve their remunerationGiven that non-audit fees are considered excessive and may undermine auditor independence, we recommend that shareholders oppose these resolutions.
Item 19: Approve the 2019 Deferred Bonus PlanAlthough deferral of the bonus can align executives' interests with the long-term, pay at the Company is now sufficiently aligned with the long-term while the maximum bonus still exceeds guidelines. Given the size of the bonus, we recommend shareholders oppose.
Tesco is a retailer. Co. and its subsidiaries are engaged in retailing and associated activities in the U.K. and Republic of Ireland; and Czech Republic, Hungary, Poland, Slovakia, Malaysia, and Thailand. Co. provides retail banking and insurance services through Tesco Bank in the U.K. Co. sells and services of motor and home insurance policies underwritten by Tesco Underwriting Limited, or in a minority of cases by a third-party underwriter. As of Feb 25 2017, Co. had a total of 6,809 stores worldwide, including 256 franchised stores.
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