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Tesco to pay ousted boss Phil Clarke £1.22m – despite profits hole | |
(about 7 hours later) | |
Tesco suffered a humiliating blow yesterday as it was forced to pay more than £2m to its former chief executive and finance director, who left before the discovery of a £263m black hole in its profits. | Tesco suffered a humiliating blow yesterday as it was forced to pay more than £2m to its former chief executive and finance director, who left before the discovery of a £263m black hole in its profits. |
Former chief executive Phil Clarke, ousted in October last year, will receive £1.22m and former finance director Laurie McIlwee, who resigned, is to get £971,000 under what Tesco called “liquidated damages” contractually due to the two men. | Former chief executive Phil Clarke, ousted in October last year, will receive £1.22m and former finance director Laurie McIlwee, who resigned, is to get £971,000 under what Tesco called “liquidated damages” contractually due to the two men. |
Both were leading the company when the commercial practices which led to the scandal were occurring. Tesco issued a series of profit warnings under Mr Clarke and its share price tumbled to a 14-year low. He was replaced by Dave Lewis, an executive from consumer goods giant Unilever. | Both were leading the company when the commercial practices which led to the scandal were occurring. Tesco issued a series of profit warnings under Mr Clarke and its share price tumbled to a 14-year low. He was replaced by Dave Lewis, an executive from consumer goods giant Unilever. |
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”. | 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”. |
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 £263m overstatement of profits and an investigation by the Serious Fraud Office. | 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 £263m overstatement of profits and an investigation by the Serious Fraud Office. |
But Tesco said yesterday: “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.” | But Tesco said yesterday: “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.” |
It was not clear if either of the former directors has taken legal action against Tesco and neither was available for comment last night. | It was not clear if either of the former directors has taken legal action against Tesco and neither was available for comment last night. |
Glenn Hayes, a partner at the law firm Irwin Mitchell, said: “Tesco was caught between a rock and a hard place as it faced potentially massive claims by these former directors for breach of contract in the High Court and the SFO’s ongoing investigations.” | Glenn Hayes, a partner at the law firm Irwin Mitchell, said: “Tesco was caught between a rock and a hard place as it faced potentially massive claims by these former directors for breach of contract in the High Court and the SFO’s ongoing investigations.” |
Tesco said that if new information came to light it would “pursue recovery of the payments and damages”. | Tesco said that if new information came to light it would “pursue recovery of the payments and damages”. |
The company suspended nine executives below board level in connection with the overstated profits. | The company suspended nine executives below board level in connection with the overstated profits. |
Two have returned to work and four left the company. The scandal is also being investigated by the Financial Conduct Authority and the accounting standards body. | Two have returned to work and four left the company. The scandal is also 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 John Allan, the Dixons Carphone deputy chairman, said to be the favoured candidate. | Tesco’s climbdown comes as it is close to announcing a new chairman to succeed Sir Richard Broadbent, with John Allan, the Dixons Carphone deputy chairman, said to be the favoured candidate. |
Tesco’s former chief executive, Sir Terry Leahy, said last month that there had been a failure of leadership under Mr Clarke. “People tried very hard to do the right thing; it clearly has not worked,” he told BBC’s Panorama. | Tesco’s former chief executive, Sir Terry Leahy, said last month that there had been a failure of leadership under Mr Clarke. “People tried very hard to do the right thing; it clearly has not worked,” he told BBC’s Panorama. |
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