Every Little Helps – As Commercial Property Cuts Manager Bonuses

Posted on 17 May, 2012 by Kirsten Kennedy

Following a tough trading year at Tesco commercial property stores, store managers have been warned to expect a cut in their annual bonus that could total over 80 per cent.

Chief Executive, Phil Clarke notified the 5,000 senior store managers and executives, from commercial properties nationwide, of his decision by letter early last week.

Last year, when those affected by the cuts received 100 per cent of their bonus, some managers and executives received £12,000 in performance based bonuses; however, this year the figure will drop to between £2,000 and £3,000. This will be applicable to all senior staff, but will exclude board members of the struggling commercial property chain.

Many employees of Tesco expected their annual bonus to be slashed following Tesco’s board posting profit warnings in January – the first in several years. However, the cuts have exceeded even the most pessimistic commercial property manager’s expectations, and as a result employee morale is said to be very low.

This has been accentuated by the fact that the board of directors’ bonuses are not expected to be negatively affected, which had led to commercial property managers calling for equal treatment across all levels of employment in the retail giant.

In the letter informing staff of the changes to annual bonuses, Phil Clarke said; “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 UK return on capital employed and our UK 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.”

Executive pay has recently become a controversial topic, following demands for Stephen Hester, Chief Executive of the Royal Bank of Scotland Group, to forego his substantial annual bonus after a difficult year for banks. As commercial properties all over the country continue to close, in the service and leisure industries as well as retail, executives are often unaffected by the economic crises faced by their employees that either have to be laid off or accept large cuts to their pay, as commercial property chains struggle to stay afloat.

Perhaps in an effort to diffuse tension between board members and store managers of the commercial property retailers, a spokesman for Tesco said; “Tesco’s top 5,000 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 has been widely known to have suffered in the past year, with competition growing from rivals such as Asda, Sainsbury’s and Morrisons. After pumping millions into its ‘Big Price Drop’ campaign, the commercial property chain was criticised for not doing enough to help its customers in tough economic times. Instead, incentives based around money-saving vouchers and price comparisons, piloted by other commercial properties, were said to outperform Tesco’s money saving schemes.

However, despite a drop in share price for Tesco commercial properties of 21.42 per cent in the last 12 months, Phil Clarke denied rumours that the commercial property supermarket chain was in trouble financially.

Do you shop in Tesco commercial properties, or are you one of the store managers who will be affected by these cuts? Do you think that the performance bonus cuts are fair, or should the board of executives also face slashes to their annual bonuses?

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