Tesco 2011 Annual Report Download - page 87

Long-term performance awards made in 2010
Performance measures Award size Performance conditions
Earnings per share • Options over shares with
a value of 200% of salary
• Exercise price equal to the
market value at the date
of grant
• Any gain is therefore
dependent on increasing
the share price between the
date of grant and exercise
• Vesting of the awards is subject to the achievement of EPS performance
conditions.
• The first 100% is subject to the achievement of underlying diluted EPS growth
of at least RPI plus 9% over three years.
• The balance vests for achieving growth of at least RPI plus 15%.
• Performance against this target will be measured at the end of 2012/13 to
determine the level of vesting.
Return on capital
employed – Group and
International
• Current plan maximum
of performance share award
of 150% of base salary
• In October 2010 awards
were made to all the
Executive Directors except
Tim Mason over Tesco PLC
shares equal to 150% of
salary
• An award was made to
Tim Mason over Tesco PLC
shares equal to 100%
of salary
• For all the Executive Directors, awards over 100% of salary will vest subject to
Group ROCE performance.
• The awards over a further 50% of salary (other than Tim Mason), will vest
subject to International ROCE performance. The rationale for this is to incentivise
and reward delivery of higher returns from invested capital outside the UK
(but excluding the US).
• Awards vest over a three-year performance period from 2010/11 to 2012/13.
• The first 75% of each element of the PSP award is subject to a target of 13.6%
for Group ROCE and 7.5% for International ROCE. 25% will vest for baseline
performance and the full 75% will vest for maximum performance against target.
• The remaining 25% of each element of the award will vest by reference to the
overall quality of ROCE performance.
• The purpose of this element of the ROCE award is to allow the Committee to
recognise the right behaviours by the Executive Directors – in particular, where
they have made substantial capital investments in the Group (especially in
developing markets) with the purpose of growing the long-term returns of the
Group but where those investments have led to a reduction in ROCE growth in
the short-term.
• The Remuneration Committee will take into account a number of factors,
including the level of ROCE achieved, the expected ROCE for additional and
existing capital investment, whether capital spend was in line with strategic
objectives and balanced short-term and long-term investment needs, the level
of sales and underlying profit growth and whether this reflected other developments
in the marketplace.
• If the Remuneration Committee exercises its judgement to allow some, or all,
of the remaining 25% of the PSP awards to vest, we will describe in the Directors’
Remuneration Report in the relevant year those factors taken into account in
determining the level of the award which would vest.
• There is no retesting of performance in respect of any targets.
• Participants are entitled to receive reinvested dividends on the value of the award
that vests.
US long-term objectives
The first 25% of the awards made in 2007 under the US LTIP to the
US CEO and under the Group New Business Incentive Plan to the
former CEO was subject to testing against US ROCE and EBIT targets
in 2010/11. The performance targets for 2010/11 have not been met
and no portion of this first tranche will vest. The next assessment
of performance will be in respect of 2011/12. As mentioned above,
in order to refocus his reward on Group performance, the US CEO
will no longer participate in the US LTIP and his award will lapse.
No other Executive Directors participate in the US LTIP or Group
New Business Incentive Plan. Senior members of the US management
team will however continue to participate in the plan.
Long-term performance awards made in 2010
The long-term performance awards granted in 2010 were made under
the 2010/11 executive remuneration policy and were subject to the
performance measures described in the table below. The performance
period for these awards is 2010/11 to 2012/13 and the portion of the
award that vests will be disclosed in the 2012/13 Remuneration Report.
TESCO PLC Annual Report and Financial Statements 2011
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