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Tesco bosses’ lack of shareholding raises eyebrows

The entire board of Tesco has bought less than £350,000 of shares in the supermarket chain, and chief executive Dave Lewis has yet to buy any, despite being in charge for a year.

The lack of share purchases by Lewis and Alan Stewart, the finance director, has raised eyebrows among corporate governance pressure groups and shows that theTesco executives have not been willing to back their turnaround plan by putting their own money into the retailer.

Tesco shares have fallen by a quarter since Lewis became chief executive last September. Britain’s biggest retailer has been rocked by an accounting scandal and a sharp fall in sales. In April, Tesco reported a loss of £6.4bn, the sixth-biggest loss ever recorded by a British company. It has been forced to cut thousands of jobs and has controversially scrapped its final salary pension scheme for staff.

In stark contrast to Lewis, David Potts, the boss of Morrisons, spent more than £1m buying 508,000 shares during his first week in charge in March.

Sarah Wilson, chief executive of shareholder group Manifest, said: “Institutional investors see director share ownership as a key alignment tool. What message does it send the markets if the directors are not prepared to invest their own capital but investors are expected to put everything at risk?”
The director shareholdings are revealed in the circular that Tesco has issued to shareholders about the proposed £4bn sale of its South Korean business

, showing that the board owns the equivalent of 179,880 shares between them, worth £329,034 at the closing share price on Friday.

As well as Lewis and Stewart not buying shares, Richard Cousins, the senior independent non-executive director, and Mikael Ohlsson, another non-executive, have yet to invest in Tesco.

John Allan, the chairman, owns 41,180 shares, while Mark Armour owns 25,000. Byron Grote and Deanna Oppenheimer hold American Depositary Receipts – instruments traded in the US that represent bundles of UK shares – that are equivalent to 113,700 shares between them.

The combined shareholding of the board is equal to just 0.0022% of Tesco. The low level of their shareholding can be partly explained by the fact that Armour and Oppenheimer are the only directors to have been on the board since before 2014.

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Tesco defended Lewis and Stewart’s shareholding. The company’s policy is that Lewis must hold four times his base salary of £1.25m in shares while Stewart must hold three times his £750,000 salary.

However, the directors have five years from joining Tesco to reach this target and the company includes shares awarded for free to Lewis and Stewart as part of their remuneration package. On this basis, Lewis holds almost £2m worth of shares and Stewart £1m.

Tesco said: “To create alignment with shareholder interest, we have robust shareholding guidelines of four times base salary for our CEO and three times base salary for our CFO. Dave Lewis and Alan Stewart are on track to meet this requirement.”

Tesco sales were continuing to fall in the latest snapshot of the supermarket sector by Kantar Worldpanel. They dropped 0.9% in the 12 weeks to 16 August in the data firm’s figures out last month, while its market share had dropped half a point over the year to 28.3%.

Influential credit rating agencies Standard & Poor’s and Moody’s, which have cut Tesco’s rating to junk, have said they had not yet seen signs of a “sustainable recovery” in the UK business.


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