Tesco 2014 Annual Report Download - page 64

ceasing to be part of the group or any other reason determined by the Committee) awards will vest at leaving and participants will normally
have 12 months from cessation to exercise awards in the form of options. If a participant leaves in other circumstances (other than in circumstances
of gross misconduct) awards will normally vest at the normal vesting date and participants will normally have 12 months from vesting to exercise
awards in the form of options. Executive Directors hold vested options under the 2004 Discretionary Share Option Plan. When an Executive Director
leaves they would have 12 months from leaving to exercise options (three years in the case of ‘good leavers’ as set out above).
Other vesting circumstances
Awards may also vest early if:
(i) a participant is transferred to a country, as a result of which the participant will suffer a tax disadvantage or become subject to
restrictions on his award; or
(ii) in the event of a takeover, winding-up or other corporate event affecting the Company, which may affect the value of share awards
(such as a demerger or special dividend).
The number of shares under an award which vest in these circumstances will be determined by the Committee. In the case of the PSP
when determining the level of vesting the Committee will consider performance and the time elapsed since grant. In the case of the
deferred bonus shares (under the 2004 and 2014 EIP) awards will vest in full.
Where an Executive Director leaves as a result of summary dismissal they will forfeit outstanding share incentive awards.
Remuneration policy for Non-executive Directors
Approach to setting fees Basis of fees Other items
• Fees for the Non-executive Chairman and
Non-executive Directors are set at an appropriate
level to recruit and retain Directors of a sufficient
calibre to guide and influence Board level decision
making without paying more than is necessary
to do so.
• Fees are set taking into account the following factors:
– The time commitment required to fulfil the role.
– Typical practice at other companies of a similar
size and complexity to Tesco.
• Non-executive Directors’ fees are set by the Board
and the Chairman’s fee is set by the Committee
(the Chairman does not take part in any discussion
about his fees).
• Fees are reviewed by the Board at appropriate
intervals (normally once every two years).
• Fees paid to the Non-executive Chairman and
Non-executive Directors may not exceed the
aggregate limit of £2m set out in the Company’s
articles of association.
• Non-executive Director fees policy is to pay:
– A basic fee for membership of the Board.
– An additional fee for the Chairman of a Committee
and the Senior Independent Director to take into
account the additional responsibilities and time
commitment of the role.
– An additional fee for membership of a Committee
to take into account the additional responsibilities
and time commitment of the role.
• Additional fees may be paid to reflect additional
Board or committee responsibilities as appropriate.
• Non-executive Directors of Tesco PLC may also serve
on the Board of Tesco Personal Finance Group Limited.
Such Non-executive Directors also receive a basic fee
for serving on this Board and additional fees for
Committee membership in line with other members of
this Board. Fees for membership of the Board of Tesco
Personal Finance Group Limited are determined by the
Board of Tesco Personal Finance Group Limited and
are reviewed at appropriate intervals.
• The Non-executive Chairman of Tesco PLC receives
an all-inclusive fee for the role.
• Where significant travel is required to attend
Board meetings, additional fees may be paid to
reflect this additional time commitment.
• The Non-executive Directors are not entitled
to participate in annual bonus or long-term
incentive arrangements.
• The Non-executive Directors have the benefit of
Directors’ and Officers’ liability insurance and
provision of indemnity and staff discount on the
same basis as other employees. The Board may
introduce additional benefits for Non-executive
Directors if it is considered appropriate to do so.
• The Non-executive Chairman has the benefit of a
company car and driver, home security, staff discount
and healthcare for himself and his partner. The
Committee may introduce additional benefits for
the Chairman if it is considered appropriate to do so.
• The Company reimburses the Chairman and
Non-executive Directors for reasonable expenses
in performing their duties and may settle any tax
incurred in relation to these.
• The Company will pay for reasonable legal fees for
advice in relation to terms of engagement.
• If a Non-executive Director was based overseas
then the Company would meet travel and
accommodation expenditure as required to fulfil
Non-executive duties.
Non-executive Director letters of appointment
Non-executive Directors have letters of appointment setting out their duties and the time commitment expected. Appointments are for
an initial period of three years after which they are reviewed. In line with the UK Corporate Governance Code, all Non-executive Directors
submit themselves for re-election by shareholders every year at the Annual General Meeting. All Non-executive Directors’ appointments
can be terminated by either party without notice. Non-executive Directors have no entitlement to compensation on termination.
The letters of appointment are available for shareholders to view at the Company’s registered office.
Considering colleagues views
The Committee does not consider that it is appropriate to consult directly with colleagues when developing the Directors’ remuneration
policy. A significant portion of our colleagues are shareholders so are able to express their views in the same way as other shareholders.
The Company undertakes an annual viewpoint survey for all Group employees to understand their views on working for Tesco and how
this can be improved. Feedback on employee reward is provided as part of this survey.
The Committee reviews information regarding the typical remuneration structure and reward levels for other UK based employees
to provide context when determining executive remuneration policy.
Considering shareholders’ views
The Committee believes that it is very important to maintain open dialogue with shareholders on remuneration matters. The Committee
regularly consults with significant shareholders regarding potential changes to remuneration arrangements and the views of shareholders
are important in determining any final changes. Going forward the Committee will continue to liaise with shareholders regarding
remuneration matters more generally and Tesco arrangements as appropriate. It is the Committee’s intention to consult with major
shareholders in advance of making any material changes to remuneration arrangements.
Approved by the Board on 2 May 2014
Stuart Chambers, Chairman of the Remuneration Committee
Other information
Governance Financial statementsStrategic report
Tesco PLC Annual Report and Financial Statements 2014 61