Shares of Ocado have slumped this week, dipping to a low of 172.2p, a stark contrast to the company’s initial float price of 180p in 2010. The decline comes amidst mounting speculation regarding the potential departure of Tim Steiner, the co-founder and chief executive of the online grocery giant, who has amassed nearly £100 million in pay since the company went public. This unfolding situation raises significant questions about executive compensation and the future direction of the company.
Executive Pay Under Scrutiny
Tim Steiner, who co-founded Ocado in 2000 and has played a pivotal role in its development, is reportedly in discussions about his future with the firm. Analysis by the High Pay Centre has revealed that Steiner’s compensation has reached an astonishing £94 million, primarily due to lucrative share awards. Campaigners have voiced serious concerns about the fairness and proportionality of such pay, especially as the company’s stock struggles.
Paddy Goffey, head of research at the High Pay Centre, commented, “Tim Steiner’s pay trajectory illustrates a broader problem in the UK’s broken executive pay framework: compensation is increasingly shaped by sporadic, outsized awards, rather than being linked to genuine performance.” Goffey further highlighted that the staggering £59 million Steiner received in 2019—largely from lucrative deals selling Ocado’s technology to international grocery chains—does not reflect the company’s overall performance or the wellbeing of its employees.
Boardroom Changes on the Horizon?
Reports have surfaced indicating that Ocado’s board has begun to explore potential replacements for Steiner, with Niklas Heuveldop, the current CEO of Vonage, being mentioned as a possible successor. However, the specifics of this succession planning remain unclear, and sources suggest that the process may have been initiated without full consultation with Steiner himself, reflecting the pressures stemming from the company’s declining stock price.
The appointment of Adam Warby as chairman in December 2024 may have catalysed this search for new leadership. Warby, who previously chaired the headhunting firm Heidrick & Struggles, is believed to be acting on behalf of large shareholders who have expressed dissatisfaction with Steiner’s hefty remuneration package amid the company’s faltering stock performance.
Market Reaction and Future Outlook
Ocado’s shares have taken a significant hit, falling more than 90% over the past five years. The company, which once saw its stock soar to nearly £28 during the pandemic, now finds itself grappling with a market that has shifted dramatically. The optimism surrounding the growth of online grocery shopping has waned, particularly after key partners such as Kroger and Sobeys announced closures of facilities that utilised Ocado’s technology.
Clive Black, an analyst at Shore Capital, remarked on the implications of Steiner’s potential exit, stating, “A plan to oust Steiner wouldn’t be wholly unfathomable given the [low] share price and how much he pays himself.” Despite the challenges, Black acknowledged Steiner’s role in establishing Ocado as a FTSE 100 company, indicating that investors who acted wisely in the past may have profited significantly.
While some major shareholders, including Jörn Rausing, who controls a 10% stake, appear to remain supportive of Steiner, insiders within Ocado suggest that a leadership change could create further complications. “The majority back Tim. Going now could create extra problems internally. I think the pressure is coming from major shareholders,” noted one source close to the company.
Why it Matters
The situation at Ocado encapsulates broader issues within corporate governance and executive compensation in the UK. As the company grapples with declining stock prices and shareholder unrest, the scrutiny on Steiner’s pay highlights the ongoing debate about fairness and accountability in executive remuneration. The outcome of this scenario could have lasting implications not only for Ocado’s future but also for how companies across the UK structure and justify their leadership compensation practices in an increasingly critical market landscape.
