Tesco execs on the rack at AGM

Sir Terry Leahy
Sir Terry Leahy with Frank Lampard earlier in the week. Photograph: David Levene

Tesco faced an unprecedented revolt today over the meagre wages it pays workers in the developing world to supply its supermarkets with everything from cheap clothing to fruit.

Shareholders at the company's annual meeting in London also voiced their anger at a controversial new pay scheme for chief executive Sir Terry Leahy, which could see him pocket over £11m if Tesco's expansion into the US market succeeds.

More than one-in-six shareholders failed to back Sir Terry's new pay scheme, while almost 20% of shareholders refused to reject a resolution calling for Tesco to pay workers in the developing world a "living wage".

The latter resolution was tabled by Ben Birnberg, a retired solicitor and company secretary at War on Want.

The board of Tesco called on shareholders to reject it saying that the company is already taking steps to ensure its suppliers treat workers properly.

But Mr Birnberg told the meeting that "the irony of the board recommending that shareholders vote against our resolution to increase the meagre pay of its outsourced workers ... while at the same time provocatively recommending that shareholders vote for incentive plans which will augment the already absurdly generous remuneration packages for its top executives ... may be lost on the board but it is certainly not lost on this shareholder or more to the point on the public at large".

"There is nothing that lowers a company more in the estimation of right thinking people generally ... than a public display of executive greed in an affluent world going hand in hand with a public display of corporate miserliness and indifference towards those at the bottom in an impoverished world who contribute so munificently to our corporate wealth," he added.

"Let Tesco as the market leader, steal a march on its competitors and blaze an ethical trail."

He received support for his resolution from the Joseph Rowntree Trust, with just under a million shares, while the CIS, which has £25bn under management and is a significant shareholder in Tesco, was among those who abstained on the vote.

To applause from the floor, the meeting was also addressed by Gertruida Baartman a South African fruit picker whose farm supplies Tesco through exporter Capespan.

She attended the meeting last year to speak up for the plight of agricultural workers, but said today: "I have decided to come here again because little has changed in our lives."

"Our children still go hungry ... we don't want to beg and borrow to stay alive. We are asking Tesco to give us what we deserve. We just want to live a life of dignity."

Tesco chairman David Reid told the meeting that he had met Ms Baartman, who was brought to the UK by Action Aid, and representatives of her union.

He said the company would expand its ethical audit of South African farms. It sources fruit from almost 1,000 farms in the country but so far only about 150 have been through an independent ethical auditing process.

The meeting, which ran for more than three hours, was also addressed by a Bangladeshi textile worker who told the company that workers there are not being paid "a living wage".

From the floor, one small shareholder recommended that Mr Reid spend six months working in a Bangladeshi textile mill and surviving on local wages and then try working on a South African fruit farm.

"If everything's fine, you'll have a great time and come back with a tan," he said. "If not, you'll be thinner and a lot more understanding of the plight of these poor people."

Alongside the usual shareholder gripes about the lack of biscuits and coffee, and the early start of the meeting - meaning the predominantly pension-age audience had to stump up for full rail and Underground fares - there were several jibes about executive pay.

In the end, 8.75% of shareholders refused to back the company's remuneration policy while 17.71% refused to back Sir Terry's special US bonus.

Speaking after the meeting Mr Reid said the company would press on with the US bonus scheme, adding "there is no row with shareholders".

"The ones who disapproved, although they like Terry and like the US strategy, see the structure as setting a precedent and if other companies started to use that, it would be something they would not like," he said.