Companies tend to resent the suggestion that they have, by stealth, turned discretionary bonuses for executives into semi-guaranteed supplements to salary. But it's true – they have. Look at the payoff awarded by Tesco to Tim Mason, the now-departed boss of the soon-to-close US business Fresh & Easy.
Mason will get £1.68m in "liquidated damages", but look at how it's made up. First, there is £845,000, or a year's salary. Fair enough, most contracts for directors at large companies stipulate that. On top, though, Mason is entitled to the average of his bonus for the last two years – that's worth a further £835,000.
But why should he get a farewell bonus given the circumstances of his exit? Fresh & Easy was a flop. It never came close to meeting its targets. Tesco lost about £1.5bn on its US adventure. Remember, Mason was hardly paid meanly during his long innings at Tesco. He doubled up as head of group marketing and earned £7.3m in the two-year 2009-2011 period.
Tesco says contracts for new directors no longer allow bonuses for departees. One should hope so, too.
