Tesco is to give more than £2m to its former chief executive and finance director after being told it had no legal grounds to continue withholding the payouts.
The supermarket chain had announced in October it was blocking payments of £1.2m to Philip Clark and £970,800 to Laurie McIlwee while it investigated last year’s £263m accounting scandal.
Tesco said it would pay the two bosses who left last year because “defending costly claims for the payments would not be in the company’s best interests”. The company said it might have to claw cash back in the future.
“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. The company has taken legal advice and has concluded that it does not have the basis for continuing to withhold the payments,” it said.
Mcllwee resigned as chief finance officer in April last year – before the accounting irregularities were uncovered – while Clarke was ousted in July as the supermarket group faced falling sales and profits.
His successor, Dave Lewis, stunned the City in September when he revealed that profits had been artificially inflated by £250m, a figure later increased to £263m. Nine executives were suspended, two have returned to work and four have left while there has been no update on the other three.
The Serious Fraud Office is continuing to investigate the way the accounts were stated and Tesco said: “If new information were to come to light which would change this assessment, the company will pursue recovery of the payments and damages and has fully reserved all its legal rights in this respect..”
Clarke’s departure after 40 years was regarded as particularly bruising, as he was preparing to attend a party to celebrate his tenure at business which has suffered a dramatic fall from grace.
The accounting problems came to light as the extent of Tesco’s dominance has been challenged by discounters such as Aldi and Lidl. To arrest the slide in market share and sales, Lewis is now preparing to withdraw up to a third of the product lines to simplify shoppers’ choices and attract back baffled customers.
guardian.co.uk © Guardian News and Media Limited 2010