Profit a Man
Tesco has just posted an annual profit of well over two billion pounds while recognising that food price inflation was a ‘ little difficult’ for the public. KENT BARKER writes an open letter to Tesco Chief Executive Ken Murphy.
Dear Mr Murphy
Full disclosure: I shop at your stores in and around Hastings from time to time. So I was interested to read your comments following the release of Tesco’s latest figures. I suppose one should say ‘congratulations’ for presiding over an increase in profits of 160%. No doubt that will help you justify your earnings as chief executive, of £4.4 million a year. But what rather stuck in my craw was your assertion that Tesco had “worked hard to cut prices”. Quite frankly, with profits of £2,300,000,000 I think you might have been able to cut them just the teeniest bit further – don’t you?
But of course you had your board’s salaries to worry about. I mean, on average your non-executive directors pocket £350,000 a year. And that’s for part-time work of course. Most seem to have other pretty lucrative jobs to tide them over. Unlike the bulk of your 330,000 employees. They don’t have time for much else. You reportedly pay your retail store assistants the princely sum of £8.29 an hour. That makes their annual salary around £17,243 per year. Less than one two-hundred-and-fiftieth of what you get. In other words, combine the entire annual payments of 250 of your store assistants, and it wouldn’t even begin to reach what you get paid.
But it’s not just your employees I’m concerned about, it’s your customers. It was good of you to recognise that “things were still difficult” for them, even though price inflation had “lessened substantially”. You trumpeted the fact that “4,000 products were cheaper at the end of the year than at the start.”It was, you said, an “average price cut of about 12%”.
Well, that’s good news then. Except that the previous year in some places they had risen by 25%. So we weren’t even halfway back to where we had started, were we? And the Office for National Statistics confirmed that food price inflation had ‘fallen’ to 7%. That’s not to say that prices had fallen, only that the increase in prices had fallen. That’s across the board, but I doubt if it’s much different in a Tesco store.
But then, like any good capitalist, you probably see your prime duty as being to your shareholders, don’t you? And they’ve done pretty well out of your stewardship. For every hundred shares they received a dividend of £8.25. Just about what your store assistants get paid for an hour’s hard graft. Except that your shareholders did absolutely nothing for their money – except possibly skim over your annual financial report and note that their portfolio was worth 5.2% more than a year ago … and that their dividends had more than doubled.
If my sums are right, you paid out £577,000,000 in dividends last year. If spread equally among your 330,000 employees, that would have meant a bonus of more than £1,700 each. Or you could have used the money to really lower your prices – perhaps back to where they were two years ago? Of course, if you also diverted your profits into reducing prices as well, then you would have scope for meaningful price cuts. And then Aldi or Lidl would be chasing you, rather than the other way round.
Finally, here’s a really radical idea. Turn yourself into a mutual. Plough ALL your profits into reducing prices and paying staff a decent wage. And perhaps reduce your own salary a tad? After all, you are getting £2,291 an hour on average compared to their £8.29. If the idea doesn’t appeal, then perhaps we should all start a campaign to nationalise Tesco. It would help with our country’s food security issues and help to get the cost of the weekly shop under control. The only downside I can see is that it might adversely affect food banks and put their employees out of work. A relatively small price to pay, I’d have thought.
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