#Dave Lewis has thrown out Tesco - s kitchen sink - he won - t be able to do it a second time - Business Comment - Business - The Independent

Kitchen sinking is the term used when a recently appointed chief executive wraps up all the bad stuff they’ve found in a business and chucks it out in an early results announcement.

The aim is to leave the business free of unpleasant accounting issues (such as property writedowns) and to make sure the City knows who is to blame for other nasties.

In announcing the sixth biggest loss in British corporate history, Tesco’s Dave Lewis has also included the fridge freezer, the cooker and that juice maker that had sat gathering dust ever since someone had the idea that kale could play a role in making a palatable drink.

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The City at first seemed to take the fact that the headline number was worse than even most pessimists had feared in its stride. But as the reality outlined in some decidedly downbeat language from the company started to sink in, the shares slid because there really isn’t much to feel optimistic about. Tesco has more than £8bn of debt on its books. It operates in a brutally competitive sector against aggressive new entrants with none of its legacy issues, and established competitors (Sainsbury’s, Waitrose, Asda) which would appear to have rather more flexibility than it has.

The decline in sales has been stemmed somewhat, but it hasn’t been stopped, and Mr Lewis looks set upon selling off some of the family silver to fix the balance sheet rather than gambling on a rights issue, despite there being some support for that in the City.

Here’s the point I want to make. His predecessor, Philip Clarke, was appointed as chief executive in 2011, having previously worked under Sir Terry Leahy. Just for fun I pulled out the 2012 annual report which showed that between 2007/2008 year and the 2011/2012 year he had been paid more than £14m, a truly staggering sum.

Now even though bonuses weren’t much of an issue during the subsequent years of his reign, he still picked up more than £1m a year in salary on top of that until his eventual departure last September.

The report opined that “motivating and incentivising this (management) team to deliver sustainable long-term performance is fundamental to our ongoing success” in the section on remuneration strategy. Given the legacy Mr Lewis has sought to throw out in these results, that doesn’t appear to have worked out too well.

We’re often told executives are rare, super-talented people who need enormous salary packages to attract, retain and motivate them. Until events prove otherwise. Like they have with Tesco. After which another super-talented executive has to be attracted, motivated and retained with a similarly eye-popping remuneration package to clear up the mess.

An executive like Mr Lewis.

We’re about to find out whether he’s worth it. He won’t be able to do this sort of thing a second time around.