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Tesco pays former boss Phil Clarke £1.2m in contract settlements Tesco faces another blow as it is forced to pay former boss Phil Clarke £1.2m
(35 minutes later)
Tesco has paid around £1.22 million to Phil Clarke, its former chief executive ousted last year. Tesco has been forced to pay more than £2 million to its former chief executive and finance director who left just before the discovery of a £263 million black hole in its profits.
The news came after Britain's biggest retailer lifted suspensions on contract settlements for him and for former finance chief Laurie McIlwee, who receives £970,880 under the separation agreement. Former chief executive Phil Clarke, who was ousted, will receive £1.22 million and former finance director Laurie McIlwee, who resigned, gets £971,000 under what Tesco called “liquidated damages contractually” due to the two men.
The payments were held back due to an investigation into Tesco's accounting practices. Both were leading the company when the commercial practices that led to the scandal were occurring.
Tesco said in a statement: "The company has taken legal advice and has concluded that it does not have the basis for continuing to withhold the payments." Tesco issued a series of profit warnings under Clarke and its share price tumbled to a 14 year low. He was ousted in October and replaced by Dave Lewis, a high-flying executive from consumer goods giant Unilever.
"Accordingly, the Board considers that defending costly claims for the Payments would not be in the company’s best interests." Previously, the supermarket giant said in October’s half-year results that it was suspending those payments “given the investigation into the issues regarding the accounting for commercial income.”
Tesco has taken legal advice on the payments (Getty) In September last year, Tesco admitted that it had overstated its profits by around £250 million and launched a probe into the matter. The Serious Fraud Office is also investigating. Tesco has taken legal advice on the payments (Getty) That referred to the millions of pounds which Tesco had demanded from many of its suppliers as rebates for displaying their products prominently on its shelves. This led to a £263 million overstatement of profits and an investigation by the Serious Fraud Office.
Tesco suspended a number of executives, including its UK head Chris Bush, as a result. But announcing the humiliating blow today, Tesco said: “The company is contractually committed to make the relevant payment to each former director unless it can legally establish a case of gross misconduct against him.
One of the group, convenience division boss Sean McCurley, has since returned to work having been cleared of wrongdoing, Retail Week reported. “The company has taken legal advice and has concluded that it does not have the basis for continuing to withhold the payments. Accordingly, the board considers that defending costly claims for the payments would not be in the company’s best interests.”
Clarke, a Tesco lifer, left the supermarket last summer after saying its first quarter results were the worst he had seen in his four decades at the company. It was not immediately clear if either of the former directors has taken legal action against Tesco and neither was available for comment.
He was succeeded by former Unilever executive Dave Lewis, who has since unveiled a turnaround plan, including sweeping cost cuts, store closures and project cancellations. Tesco said that if new information came to light it would “pursue recovery of the payments and damages”.
Additional reporting by Reuters The company suspended eight executives below board level in connection with the over-stated profits but at least one of these is reported to have returned to work recently. The scandal is being investigated by the Financial Conduct Authority and the accounting standards body.
Tesco’s climbdown comes as it is close to announcing a new chairman to succeed Sir Richard Broadbent with Dixons Carphone deputy chairman John Allan reportedly the favourite.