Tesco 2011 Annual Report Download - page 84

and therefore paid in instalments to facilitate this. If the termination
occurs within one year of retirement, the termination payment will be
reduced accordingly.
New appointments of Executive Directors will normally provide for
termination on 12 months’ notice by the Executive. However, the
Committee reserves the right to vary this period to 24 months for the
initial period of appointment and for the notice period to then revert
to 12 months. The service agreements are available to shareholders
to view on request from the Company Secretary.
New CEO contract
The Committee has taken into account the feedback received from
shareholders and shareholder representative bodies regarding best
practice in relation to the inclusion of bonus in directors’ termination
arrangements. To ensure full alignment with best practice, the
Committee has agreed with Mr Clarke that under his new contract as
CEO any termination payment in lieu of notice will be based on salary
and benefits only. This will also be the policy going forward for new
executives joining the Board.
CURRENT REMUNERATION ARRANGEMENTS AND
PAYOUTS FOR 2010/11
Tesco’s core objective is to create value for customers to earn their
lifetime loyalty and through this to create value for our shareholders.
2010/11 has been another solid year despite ongoing challenging
market conditions. Returns have grown strongly over the past year
representing a significant step towards our long-term goals. Our core UK
business remains robust and the increasing scale and competitiveness
Group short-term objectives
The table below is a summary of the actual performance delivered in 2010/2011:
of our international business is driving strong performance in these
markets. Against this performance background, the main aspects
of executive remuneration practice for the 2010/11 year are as follows:
Salaries 2010/11
The base salaries of the Executive Directors following review in
July 2010 were:
Director
Basic salary 1 July 2010
£000
Richard Brasher 832
Philip Clarke 832
Andrew Higginson 832
Tim Mason 832
Laurie McIlwee* 832
Lucy Neville-Rolfe 624
David Potts 832
* Laurie Mcllwee was appointed to the role of CFO in January 2009. At this time, his base
salary was set behind that of the other Executive Directors to reflect the fact that he
was new to the role. The intention was to move his base salary to the level of the other
Directors over time. The Committee reviewed Mr Mcllwee’s performance and base salary
in July 2010 and concluded that Mr Mcllwee’s performance was that of an experienced
CFO and therefore it was appropriate to increase his base salary to £832,000, the same
level as the other Executives.
The average increase for established Executive Directors last year was
2.46%, which was broadly the same as the increase for other senior
executives and employees throughout the Group.
Performance measures Maximum award opportunity Performance against targets
Earnings per share 75% of cash element and 50%
of share element
The reported underlying diluted Group EPS for 2010/11 was 35.72p, an increase of
10.8% on last year.
Corporate objectives 25% of cash element and 30%
of share element
The corporate objectives are based on our balanced scorecard, known as the Steering
Wheel. Corporate objectives for the awards made in respect of the financial year
2010/11 were:
• increasing sales from new space; specific profit targets for international businesses
and for retailing services;
• like-for-like sales growth and the development of the non-food business;
• focus on productivity improvements and developing trading models internationally;
• enhancing talent management and capability;
• embedding the new international Community Plans and Community Promises; and
• reducing our environmental impact.
Two-thirds of targets were fully met at the stretch level and a solid performance was
delivered against the remainder.
Total shareholder
return
20% of share element The target to outperform against the FTSE 100 and a comparator group of international
retailers that includes Ahold, Carrefour, J Sainsbury, Metro, Wm Morrison, Safeway
Inc, Target and Walmart was not met over the short term although long-term TSR
performance remained strong.
Former CEO
• Maximum of 250% of base salary
• 200% of salary based on Group
performance; 50% of salary based
on US performance
• 100% of salary in cash; 150% of salary
in shares
Executive Directors
• Maximum of 200% of salary
• All based on Group performance
• 100% of salary in cash; 100% of
salary in shares
US CEO
• Maximum of 300% of base salary
• 100% of salary based on Group
performance; 200% of salary based
on US performance
• 150% of salary in cash; 150% of salary
in shares
Short-term performance 2010/11
The table below sets out a summary of the maximum opportunity under the short-term remuneration arrangements for 2010/11:
80
— TESCO PLC Annual Report and Financial Statements 2011
GOVERNANCE
Directors’ remuneration report