Tesco 2013 Annual Report Download - page 51

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Tesco PLC Annual Report and Financial Statements 2013
OVERVIEW BUSINESS REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTS
Remuneration policy for Executive Directors for 2013/14
At a glance
Element Link to strategy
Operation and opportunity
Performance measures
Changes to the policy
for 2013/14CEO CFO
Fixed pay Base salary • The role of base salary
is to support the recruitment
and retention of Executive
Directors of the calibre
required to deliver the
strategy.
• £1,122,000 • £869,040 • n/a • No changes to the policy.
• When determining pay the Committee
examines salary levels at the leading
FTSE companies, other major retailers
and gives consideration to appropriate
international competitors.
• Next review 1 July 2013.
• For the last four years the base salary
increases have been similar to the
increase awarded to other colleagues
across the Group.
Pension
(Cash in
retirement)
• To provide a market-leading
retirement benefit that will
foster loyalty and retain
experienced Executives,
which supports our culture of
developing talent internally.
• A key incentive and retention
tool throughout the
organisation.
• Current pension provision of
defined benefit pension of up to
two-thirds of base salary at retirement
with a 10% employee contribution.
This is provided through registered
arrangements up to approved HMRC
limits, with the remainder provided
through secured unfunded
arrangements.
• n/a • No changes to the policy.
Benefits • To provide a market-
competitive level of benefits
for our Executive Directors.
• Core benefits – Benefits include
car allowance, life assurance, disability
and health insurance, club
membership and staff discount.
• All-employee share plans –
Executives are eligible to participate
in the Company’s all-employee
share schemes on the same terms
as UK colleagues.
• n/a • No changes to the policy.
Performance
related pay
Annual bonus
(One-year
performance)
(Cash and
shares)
• The role of the annual bonus
is to incentivise Executives to
deliver our annual financial,
strategic and operational
goals.
• The performance measures
have been selected as they
are considered to be closely
aligned to the delivery of our
seven-point strategy, building
a stronger underlying business
and long-term shareholder
value creation.
• Maximum
opportunity of
250% of base
salary.
• Maximum
opportunity of
200% of base
salary.
• 76% of bonus based on
financial performance:
– 50% of bonus based
on Trading Profit
performance.
– 26% based on
strategic financial
performance
measures.
• 24% of bonus based on
performance against
key strategic non-
financial performance
measures focused on
customer, colleague and
community objectives.
• All objectives are
specific and measurable.
• In April 2012, we set out
detailed plans to ‘Build a
Better Tesco’, which included
investing in the UK business
to improve the shopping
experience for customers and
some fundamental changes
to our approach to capital
allocation – focusing on
improving returns through
reducing space growth,
improving the performance of
existing stores, and investing
more in the digital revolution
that is shaping the future of the
retailing industry.
• To ensure that our incentives
are aligned to our plans, the
Committee has decided to
expand the success factors
against which annual
performance is assessed to
create a better balance
between incentive payouts,
financial results, and the
strategic drivers of sustainable
shareholder value.
• 50% in cash.
• 50% in shares which are deferred for
three years.
• Clawback applies to deferred shares
to allow the Committee to scale back
deferred share awards prior to vesting
in the event that results are materially
misstated.
Performance
Share Plan
(Three-year
performance)
(Shares)
• The role of the PSP is to
reward Executive Directors for
achieving Tesco’s long-term
strategy and creating
sustainable shareholder value.
• To enhance shareholder value
by motivating Executives to
grow earnings over the long
term while maintaining a
sustainable level of return
on capital.
• To align the economic
interests of Executives and
shareholders.
• To act as a retention tool.
• Maximum
award of 275%
of base salary.
• Maximum award
of 225% of base
salary.
• Based on a matrix of
ROCE/EPS growth
performance.
• In light of our business priorities
for the foreseeable future and
the financial performance that
shareholders can expect us to
deliver in the current economic
environment, we have
amended the performance
targets for the 2013 PSP
award. The calculation of
earnings growth performance
will also exclude property
profits to reflect our
fundamentally different
approach to space growth
going forward. The revised
targets are set out on page 52.
• Clawback provisions apply to awards,
allowing the Committee to scale back
awards prior to vesting in the event
that results are materially misstated.