Tesco 2014 Annual Report Download - page 60

Policy table
Element
Purpose and link
to strategy Operation Maximum opportunity Performance measures
Fixed
Benefits
continued
• All-employee share plans – Executive
Directors are eligible to participate in the
Company’s all-employee share schemes
on the same terms as UK colleagues.
• Mobility policy – Where an Executive
Director is required to relocate to perform
their role our policy is that they may be
offered some or all of the following: a
relocation allowance, location allowance,
cost of living allowance, disturbance
allowance, housing benefit, flight budget,
assistance with school fees, international
family heathcare, pension allowance,
spousal allowance and tax advice, assistance
and equalisation. The level of such benefits
would be determined based on the
circumstances of the individual and
typical market practice.
Performance related pay
Annual bonus • The role of the annual
bonus is to incentivise
Executive Directors
to deliver our annual
financial and
strategic goals.
• The performance
measures have been
selected as they are
considered to be closely
aligned to the delivery of
our strategy, building a
stronger underlying
business and long-term
shareholder value creation.
• Deferral into Company
shares provides
alignment with
shareholders.
• The malus provision
enables the Company
to mitigate risk
(see page 58).
• The annual bonus is normally delivered:
– 50% in cash.
– 50% in shares which are deferred.
• Awards will be calculated based on a
percentage of base salary and the market
share price at grant in accordance with
the rules.
• The Committee may determine that a
different balance of cash and deferred
shares may apply.
• Performance is assessed over a
financial year.
• The Committee determines the level of
bonus taking into account performance
against targets and the underlying
performance of the business.
• The deferred shares will normally vest
after three years (or an alternative period
determined by the Committee).
• Deferred shares are normally awarded in
the form of nil cost options but may be
awarded in other forms (such as
conditional share awards or forfeitable
shares). Vested nil cost options may
normally be exercised until the tenth
anniversary of the date of grant.
• Maximum annual bonus opportunity
of 250% of base salary.
• For details of award levels for
2014/15 see page 43 of the Annual
Remuneration Report.
• The annual bonus is based
on a mix of financial and
strategic performance
measures. At least 70%
of the bonus will be based
on financial performance.
• Any portion of the bonus
based on non-financial
measures will be subject to
meeting a financial underpin.
• The Committee determines
the exact metrics each year
depending on the key goals
for the forthcoming year.
• Normally around 30% of
the bonus is paid for
threshold performance,
around 50% of the bonus
is paid if target levels
of performance are
delivered with the full
bonus being paid for
delivering stretching levels
of performance. These
vesting levels may vary
each year depending on the
stretch of targets set.
• The Committee sets bonus
targets each year to ensure
that they are appropriately
stretching in the context of
the business plan.
Performance
Share Plan
• 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
capital efficiency.
• To align the economic
interests of Executive
Directors and
shareholders.
• To act as a retention tool.
• The malus provision
enables the Company
to mitigate risk
(see page 58).
• Awards normally vest based on
performance over a period of not less
than three years (unless the Committee
determines otherwise).
• Awards will be calculated based on a
percentage of base salary and the market
share price at grant in accordance with
the rules.
• The Committee has the discretion to amend
the final vesting level if it does not consider
that it reflects the underlying performance
of the Company.
• PSP awards are normally awarded in
the form of nil cost options over shares
but may be awarded in other forms
(such as conditional share awards or
forfeitable shares). Vested nil cost options
may normally be exercised until the tenth
anniversary of the date at grant.
• The maximum annual award
that can be granted under the
PSP is 350% of base salary.
• For details of award levels for
2014/15 see page 43 of the
Annual Remuneration Report.
• Awards vest based
on an earnings and
a capital efficiency
performance measure
(the satisfaction of which
is determined by the
Committee).
• For threshold levels of
performance 0% of the
award vests, increasing
to 100% of the award for
stretching performance.
• The Committee sets targets
each year so that targets are
stretching and represent
value creation for
shareholders while
remaining motivational
for management.
Other information
Governance Financial statementsStrategic report
Tesco PLC Annual Report and Financial Statements 2014 57