Tesco CEO Turns Down Bonus

Discussion
May 23, 2012

You would think on the heels of Tesco’s decision to cut performance bonuses for its store managers, there really wasn’t anything else the chain’s CEO could do but turn down his own. But the relative rarity of top executives doing the right thing has made Philip Clarke’s decision to pass on $587,000 a big news item.

"I decided at the beginning of the year that I would decline my annual bonus for 2012," Mr. Clarke said in a statement. "I wasn’t satisfied with the performance in the U.K. and I won’t take the bonus. I’m confident that we’re tackling the right issues."

Mr. Clarke’s decision has no bearing on his annual salary or other financial benefits that are part of his package. According to Reuters, Mr. Clarke is paid "a basic salary of over 1 million pounds" and was awarded share options worth 2.7 million pounds.

Discussion Question: Do you agree with Tesco CEO Philip Clarke’s decision to turn down his annual bonus? Do you think public decisions such as that of Mr. Clarke will spur a wave of similar acts by other CEOs?

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16 Comments on "Tesco CEO Turns Down Bonus"


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Dr. Stephen Needel
Guest
9 years 11 months ago

Given the scrutiny that Tesco is under, it was a smart move. Will it happen elsewhere? Not much, if history is any predictor. Many CEOs believe in the entitlement.

David Livingston
Guest
9 years 11 months ago

This is just a publicity stunt like when John Mackey of Whole Foods cut his salary to $1. These guys are rich beyond their wildest dreams and this bonus is pocket change to them. It won’t change their lifestyle one bit. I really doubt that it makes the other employees feel better. Now if he actually shared his bonus with the other employees, that would make a statement. And the CEO might be trying to impress the BOD in order to save his own job.

Roy White
Guest
Roy White
9 years 11 months ago

This move may have been borne of necessity, but, at $587,000, does seem to be taking on a lot of pain. It would be nice if some CEOs on this side of the pond thought the same way.

Fabien Tiburce
Guest
Fabien Tiburce
9 years 11 months ago

Smart move, if only to avoid a full-blown mutiny amongst the ranks! And with 3.7 million pounds in salary and options, I would like to think that Mr. Clarke can still put some food on the table….

Gene Hoffman
Guest
Gene Hoffman
9 years 11 months ago

It’s always much easier to give up a huge bonus when you have another big bundle, but Philip Clarke’s decision to turn down his annual bonus was correct. Now he’s sort of “one of the boys” with his managers.

Re: the likelihood that Clarke’s decision will spur a wave of similar acts by others; few CEOs today like to make waves.

Gene Detroyer
Guest
9 years 11 months ago
Overall, the average level of CEO pay in the S&P 500 Index increased 13.9 percent in 2011, following a 22.8 percent increase in CEO pay in 2010. (I guess that is because of the great financial boom we have experienced). The average worker’s pay did not increase. In 1960, the average chief executive earned 40 times as much as the average worker. (Probably because financial times have been difficult.) By 1990, the average CEO earned 107 times as much. Today, this ratio is 525:1. The numbers above are not new to us. We hear them all the time. Yet, it hasn’t slowed this imbalance. What the numbers suggest, of course, is that today’s CEO is contributing 10 times more worth to a company than he/she did in the 1960s. Or, contrarily, the people who work for the company are delivering only 10% of what they worth in the ’60s. “Yeah” for Philip Clarke, but be assured he is being damned in every corporate suite (at least in the United States.) Philip Clarke obviously doesn’t understand… Read more »
David Biernbaum
Guest
9 years 11 months ago

If the CEO beleives he has not earned his bonus than he did the right thing. However, his job is not the same as anyone else’s job in the company. His bonus should be evaluated and paid according to the agreement he has with his company and for his job performance. I don’t presume to know whether or not he fulfilled his commitments to earn his bonus.

Rick Myers
Guest
Rick Myers
9 years 11 months ago

If the managers aren’t getting a bonus, I think it’s only right for the CEO and other executives to not take a bonus, even if it’s in their contract that they get one.

Marc de Speville
Guest
Marc de Speville
9 years 11 months ago

Have to say, one or two of the comments here and elsewhere in the press smack of jealousy rather than analysis of the relevant psychology. Phil Clarke is indeed very rich by any normal standards but certainly not “beyond his wildest dreams.” Rich people tend to have lots of imagination, especially when it comes to ways to get even richer. Especially if they are talented, which Clarke is clearly. Tesco’s underperformance in 2011 and profit warning at the start of 2012 reflect the cost of correcting his predecessor’s mistakes (underinvestment in people and stores, and dare I say it, complacency). As others have noted, electing not to pick up $500k to which he was legally entitled sets him apart from many other CEOs. Publicity stunt or not, he should be given some credit, if only to encourage others.

Mel Kleiman
Guest
9 years 11 months ago

Right move at the right time. Not much to add to all of the other comments except that. If the store managers did not earn a bonus, it means the company did not reach its goals, so no one who is paid for results should have earned a reward.

Robert DiPietro
Guest
9 years 11 months ago

Smart move. Aligns him a bit closer to the rest of the team.

Jonathan Marek
Guest
9 years 11 months ago

It is the right move. I also hope he matter of factly takes a large bonus when the company does very well, even if the same people who applaud this move decry a big bonus. His compensation deserves to be tied to performance, on the upside and the downside.

Craig Sundstrom
Guest
9 years 11 months ago

I agree with “Spev” that many of the remarks here “smack of jealousy,” but I don’t see why that is a problem: lots of people think the C-suite is overpaid, and there are plenty of indicators to back up that position. That having been said, where’s the evidence of the “relative rarity of top executives doing the right thing”? The truly good guys — and gals — don’t feel a need to publicize their propriety, so we don’t really know how common this is or isn’t.

Steve Montgomery
Guest
9 years 11 months ago

I echo the same comment made by others — smart move. Financial impact is small, but perception is large, as evidenced by the news stories.

Kai Clarke
Guest
9 years 11 months ago

This is a great thing that all executives should be paid and incentivized by. Bonuses should be performance based and reflect the achievements of the company, which is the CEO’s responsibility. No profits, no bonus. Cutting salaries and bonuses of your employees should be done with the same goals for the executive team as well.

George Anderson
Guest
9 years 11 months ago

The decision by c-suite executives and/or board members to turn down significant forms of compensation is made a matter of public record by companies such as Tesco that trade on the major exchanges. I remain confident in the statement that the practice is relatively rare. As to private companies, what happens in them is, well, private. Unless, of course, they or someone else chooses to make it otherwise.

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