Tesco 2011 Annual Report Download - page 88

Retirement arrangements for Sir Terry Leahy
Sir Terry retired from Tesco on 2 March 2011 after 14 years as CEO.
To reflect his length of service with Tesco and the early age of his
appointment as CEO, Sir Terry Leahy’s service agreement provides for
his full pension entitlement to become available on retirement on or
after his 57th birthday. The retirement arrangements for Sir Terry are
in line with the terms of his contract and the pension plan as disclosed
in the Directors’ Remuneration Reports – he will receive no additional
enhancements beyond these terms.
Under the terms of the scheme rules unvested performance share
plan awards, share options and the Group New Business Incentive Plan
award will continue in line with the agreed terms set out at the time
of grant until their normal date and will only vest if the performance
targets attached to these awards are met.
OTHER INFORMATION
Outside appointments
Tesco recognises that its Executive Directors may be invited to
become Non-executive Directors of other companies. Such non-
executive duties can broaden experience and knowledge which can
benefit Tesco.
Subject to approval by the Board, Executive Directors are allowed
to accept non-executive appointments and retain the fees received,
provided that these appointments are not likely to lead to conflicts
of interest.
Executive Directors’ biographies, which include details of any outside
appointments, can be found on pages 60 to 61 of this Annual Report.
Fees retained for any non-executive directorships are set out below.
Director
Company in which
non-executive
directorship held
Fee retained in 2010/11
£000
Philip Clarke* Whitbread PLC 65
Andrew Higginson BSkyB PLC 96
Lucy Neville-Rolfe The Carbon Trust 18
ITV PLC 28
* Philip Clarke stepped down from his position at Whitbread plc on 1 March 2011.
Funding of equity awards
Executive incentive arrangements are funded by a mix of newly issued
shares and shares purchased in the market. Where shares are newly
issued the Company complies with ABI dilution guidelines on their
issue. The current dilution usage of executive plans is c.4% of shares in
issue. Where shares are purchased in the market, these may be held by
Tesco Employees Share Schemes Trustees Limited, in which case the
voting rights relating to the shares are exercisable by the trustees in
accordance with their fiduciary duties.
Change of control
Long-term term incentive awards may vest or become exercisable
before their normal vesting date in the event of a change of control
of Tesco PLC.
Non-executive Directors
Non-executive Directors have letters of appointment setting out their
duties and the time commitment expected. The letters are available
to shareholders to view from the Company Secretary upon request.
The Chairman meets with each Non-executive Director separately
to review individual performance. In line with the UK Corporate
Governance Code, all Non-executive Directors will submit themselves
for re-election by shareholders every year at the Annual General
Meeting. All Non-executive Director appointments can be terminated
by either party without notice. The remuneration of the Non-executive
Directors is determined by the Chairman and the Executive Committee
after considering external market research and individual contribution.
The current fees are as follows:
Basic fees £70,000 per annum
Additional fees
Senior Independent Director £26,000
Chairs of Audit and Remuneration
Committees
£30,000
Membership of Audit and
Remuneration Committees
£12,000 per annum for each
Committee
Chairman
The Remuneration Committee determines the Chairman’s
remuneration, having regard to time commitment and packages
awarded to chairmen of other companies of a similar size and
complexity. David Reid, Non-executive Chairman, receives an annual
fee of £640,000 and has the benefit of a company car and chauffeur.
Compliance
In carrying out its duties, the Remuneration Committee gives full
consideration to best practice. The Committee was constituted and
operated throughout the period in accordance with the principles
outlined in the Listing Rules of the Financial Services Authority derived
from the Combined Code on Corporate Governance. The auditors’
Report, set out on page 93, covers the disclosures referred to in this
report that are specified for audit by the Financial Services Authority.
The Report has been drawn up in accordance with the Combined Code
on Corporate Governance, Schedule 8 of the Large and Medium sized
Companies and Groups (Accounts and Reports) Regulations 2008 and
the Financial Services Authority Listing Rules.
This Report also complies with disclosures required by the Director
Remuneration Report Regulations 2002. Details of Directors’
emoluments and interests are set out on pages 85 to 91 of this
Annual Report.
Stuart Chambers
Chairman of the Remuneration Committee
84
— TESCO PLC Annual Report and Financial Statements 2011
GOVERNANCE
Directors’ remuneration report