Sainsbury’s management own-goal enrages staff

May 21 2004 by Brian Amble Print This Article

Ailing supermarket Sainsbury’s has provided a stark demonstration of why it is loosing market share to its rivals.

Sainsbury's 100,000 full-time staff usually receive a one-off Christmas Bonus of £100 in December. But for the first time in more than 25 years this will not be paid this December. Bonuses for head office staff have also been axed.

Instead they have been offered a five per cent increase in their staff discount to 15 per cent from October to December.

But staff would need to spend in the region of £1,500 before the discount scheme saved them the equivalent of £100.

In an internal memo, Justin King, Sainsbury’s new Chief Executive, said that “many colleagues will be disappointed” before trotting out the usual bumph about the firm needing to "focus all our investment behind serving customers better and driving sales".

To add real insult to this injury, King has just been handed share options worth £1.4 million exercisable from 2007. He has also been offered a further £500,000-worth of shares if he meets performance targets over the next three years.

Quite what Sainsbury’s means by ‘performance’ is a question highlighted by the £2.4m in shares awarded this week by the company’s remuneration committee to chairman Sir Peter Davis- despite his presiding over an 8.5 per cent drop in annual profits.

The figure represents 86 per cent of his maximum payout under his ‘performance-related’ incentive scheme.

Many institutional investors were furious with the bonus award, with one telling the Daily Telegraph: “This company's board needs a complete overhaul. It has been able to get away with things for too long."

As the Times’ Business Editor, Patience Wheatcroft, wrote pointedly, just how low was Sainsbury’s remuneration committee prepared to see the company’s profits sink before they decided that Davis did not deserve a ‘performance-related’ bonus?

“It does make one wonder exactly what he was supposed to do to earn his [£864,000] basic salary, other than just turn up at Sainsbury’s lavish new Holborn headquarters,” she mused.

Sainsbury’s has continued to loose market share over the past 12 months to rivals such as Waitrose and Tesco - both of whom work hard to promote themselves as good employers with a range of staff-friendly initiatives.

Meanwhile, we would love to hear how Justin King can reconcile his call for Sainsbury’s to reverse what he termed its “lack of customer focus” with a Scrooge-like move that is guaranteed to demoralise and alienate its staff at the very moment the ailing company needs them on-side.

As one member of staff quoted by the Daily Mail newspaper said: “This Justin King - he's rubbish. He's demoralised the whole staff and he's creating chaos in the store.”