TESCO defended the pay packet of its US boss today after a lobby group urged shareholders to register a protest vote at the supermarket’s annual meeting.

CtW Investment, which works on behalf of pensions funds linked to US unions, has criticised the company for the "excessive" compensation awarded to Tim Mason, who is the boss of Tesco’s loss-making US chain Fresh & Easy.

Mr Mason received £4.3 million in the company’s 2009/10 financial year, up from £3.8 million and despite a £165 million loss at the US venture.

CtW said Tesco had failed to link executive pay and performance and accused it of shifting the goal posts in order to provide Mr Mason with a pay package that "no reasonable analysis of Fresh & Easy’s performance could justify".

The lobby group has urged shareholders to vote against the remuneration report at the company’s annual meeting in London on July 2.

RiskMetrics, whose Research Recommendations and Electronic Voting service provides advice to UK pension funds, has also raised concerns.

Tesco said it was disappointed by the objections, given its strong performance in the last year against difficult economic conditions.

It noted that the Association of British Insurers recently published a supportive report on Tesco for shareholders and said its approach to executive pay was based on rewarding good long-term performance.

The company added: "The performance bonuses for Tim Mason reflect the progress he has made in developing the Fresh & Easy business despite the severe economic conditions which has meant a slower than planned opening programme.

"The stores we have open remain very popular. Customer feedback has been fantastic, customer numbers are growing strongly, basket size is increasing and we are becoming a major retail player - already the 75th largest retailer in the US.

"We will continue to meet with shareholders to explain our approach ahead of next month’s AGM."

Mr Mason was recently promoted to deputy chief executive as part of the reshuffle announced in the wake of Sir Terry Leahy’s decision to stand down from the helm of the retailer in March.