Tesco 2014 Annual Report Download - page 45

Remuneration policy for Executive Directors
Fixed element (c.20% of total reward assuming maximum performance)
Salary + pension + benefits
Performance related element (c.80% of total reward assuming maximum performance)
Short-term performance Long-term performance
Cash bonus Deferred share
bonus Performance Share Plan
Financial measures (76%):
Profitability (50%) and strategic
financial measures (26%)
Strategic non-financial
measures (24%)
Matrix of EPS growth and return
on capital employed (‘ROCE’)
The following report outlines our remuneration strategy and philosophy, how remuneration policy was implemented in 2013/14 and how
the Committee intends to apply policy in 2014/15. This Annual Remuneration Report will be submitted to an advisory shareholder vote at
the AGM on 27 June 2014.
Remuneration strategy
Tesco’s most important asset is its people. Business success depends on the performance and contribution of each individual colleague
but outstanding performance comes from teamwork. Our approach to remuneration throughout Tesco is guided by a framework of
common objectives and principles which are outlined in the table below.
Reward objectives Reward principles
Attract
• Enable Tesco to recruit the
right people
Motivate
• Incentivise colleagues to deliver
our business goals together
Recognise
• Acknowledge individual
contribution and performance
Align
• Create shareholder value and
support the achievement of
the business’ core purpose by
focusing colleagues on making
what matters better
Retain
• Foster loyalty and pride in Tesco so
that colleagues want to stay with
us and strive to do their best
Competitive
• We assess competitiveness on
atotal reward basis including
financial and non-financial
rewards
• Reward reflects an individual’s
role, experience, performance
andcontribution
• Reward is set with reference to
external market practice and
internal relativity
Simple
• Reward is simple, clear, and easy
to understand
• We avoid unnecessary complexity
• Reward is delivered accurately
Total Reward
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Fair
• Policies are transparent, and
applied consistently and equitably
• Reward decisions are trusted and
properly governed
• Reward is legal and compliant
Sustainable
• Reward is aligned to the business
strategy, reflects our performance,
and is affordable
• Our reward framework is flexible
tomeet the changing needs of
thebusiness
• We reward in a responsible way
Linking executive pay with strategy
•Alignment with strategy
Our strategic focus is to build a stronger business that
is sustainable and equipped to compete in the future.
The majority of our reward is linked to the delivery of
stretching performance over the short and long term
aligned with the achievement of our business vision and
our strategy (see the Report from the Chief Executive on
pages 3 to 7). The majority of reward is delivered in shares.
Our short-term performance is measured in relation to
profit growth and the delivery of other strategic financial
and non-financial objectives. Our long-term performance is
measured by assessing the growth in our earnings per share
and the level of our return on capital. These metrics are a key
measure of the success of the delivery of shareholder value.
• Simple, collegiate approach to remuneration
Our remuneration arrangements are designed to be simple to
provide clarity to our Executives and to shareholders. Executive
Directors and other management participate in a common
incentive framework to ensure teamwork in delivering our key
strategic goals.
•Creating alignment with shareholders by building
a shareholding in our business
We believe that it is important that our colleagues are shareholders
in the business to create alignment with other shareholders.
The CEO’s shareholding guideline is to hold shares with a value of
four times salary, the CFO is required to hold shares with a value of
three times salary and other senior managers are required to hold
shares with a value of one times salary.
The following chart and accompanying table provide a summary
of how remuneration policy will be applied in 2014/15.
42 Tesco PLC Annual Report and Financial Statements 2014
Directors’ remuneration report continued
Annual remuneration report