Tesco 2015 Annual Report Download - page 70

Legacy plans
Deferred bonus shares awarded prior to 2014 were granted under the 2004 Executive Incentive Plan. Under this plan, in the event that a
participant leaves for ‘good leaver’ reasons (death, injury, ill-health, disability, redundancy, retirement, the entity which employs the Executive
Director 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.
Philip Clarke and Laurie McIlwee hold vested options under the 2004 Discretionary Share Option Plan and 2004 PSP. Under these plans,
when participants leave, they have 12 months from leaving to exercise options.
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 (under the PSP and 2004 Executive Incentive Plan); 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 Executive Incentive Plan) 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
• 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 the annual bonus or Performance
Share Plan
• 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 may have 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 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. The unexpired term of Non-executive Directors’ appointments can be found
on page 35. 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.
68 Tesco PLC Annual Report and Financial Statements 2015
Directors’ remuneration report continued
Directors’ remuneration policy