Senior store managers at Tesco are said to be "outraged" after hearing that their annual bonuses had been slashed by more than 80 percent following a rare down year for the U.K. retail giant.
According to the Financial Times, approximately 5,000 store managers and executives just below the board level were sent a letter last week by CEO Philip Clarke warning them that their annual performance-based rewards would be dramatically reduced following an earnings and sales shortfall.
The letter stated, "Last year was a difficult one despite delivering another record set of results. The group missed its profit targets and had a mixed performance across our six corporate objectives - we missed the threshold for U.K. return on capital employed and our U.K. like-for-like sales target. Following a review of our performance for 2011/12, the executive committee has approved an award of 16.9 per cent of your maximum bonus."
In 2011, managers received 100 percent of their maximum bonus payout with many receiving on average £12,000 ($19,000). The 16.9 percent cut is expected to reduce annual bonuses to between £2,000 and £3,000 ($3,200 to $4,800).
The Daily Mail said that while non-exec personal recognized that bonuses would be lower given reports that Tesco showed its worst performance in 20 years, the size of the bonus cuts surprised many "with morale said to be at rock bottom."
The annoyance level is said to be particularly high since moves by top management to tighten coupon policies, reduced stores' promotional cadence and other marketing failures were blamed as largely responsible for Tesco losing market share to rival Sainsbury's. Given the media attention to executive pay, the story is expected to get a reprise next week when bonus allocations to the CEO and other board members are revealed.
A spokesman for Tesco issued to the British press indicated that board-level execs will receive similar treatment. The statement read, "Tesco's top 5000 leaders, including the executive directors, all have genuinely performance linked incentives and these are closely aligned. We will announce full details in our annual report published later this month and those at the top of the company will take their share of the impact of last year's results."
- Tesco to slash bonuses after poor results - Financial Times
- Tesco store managers left outraged by 80 per cent cut in bonuses after 'difficult year' - Daily Mail
- Tesco chief's Big Bonus Drop angers store managers - Guardian
- Why the Tesco flag has slipped to half mast - Telegragh
- Christmas & New Year Trading Statement - Tesco
- Preliminary Results 2011/12 - Tesco