Tesco 2006 Annual Report Download - page 31

29Tesco plc
Service agreements
The Executive Directors have service agreements with
entitlement to notice of 12 months by the Company and
six months’ notice by the Executive.
If an Executive Director’s employment is terminated (other than
pursuant to the notice provisions in the service agreement or
by reason of resignation or unacceptable performance or
conduct) the Company will pay, by way of liquidated damages,
a sum calculated on the basis of basic salary and the average
annual bonus paid for the last two years. No account will be
taken of pension or any other benefit or emolument.
Termination payments will be subject to mitigation. This means
that liquidated damages amounts will be paid in instalments
to permit mitigation and earlier payment will be made based
on long service in line with Company policy which respects
and rewards loyalty. If the termination occurs within one
year of retirement, the termination payment would be
reduced accordingly.
The Committee has agreed that, in future, new appointments
of Executive Directors will normally be on a notice period of
12 months. The Committee reserves the right to vary this
period to 24 months for the initial period of appointment and
for the notice period to then revert to 12 months. The service
agreements are available to shareholders to view on request
from the Company Secretary.
Outside appointments
The Company recognises that its Executive Directors are likely
tobe invited to become Non-executive Directors of other
companies. Such Non-executive duties can broaden experience
and knowledge which can benefit Tesco PLC. Subject to
approval by the Board, Executive Directors are allowed to
accept Non-executive appointments and retain the fees
received, provided that these appointments are not likely to
lead to conflicts of interest. Executive Directors’ biographies
can be found in the Annual Review and Summary Financial
Statement and fees retained for any Non-executive
Directorships are set out below.
Company in which Fee retained by
Non-executive the Director in
Director Directorship held 2005/06 (£’000)
Mr P A Clarke Whitbread Plc* 7.5
Mr AT Higginson British Sky Broadcasting 47
Mr TJ R Mason GCap Media Plc** 32
*Appointed 1 January 2006
** Resigned 14 March 2006
Non-executive Directors have letters of appointment setting
out their duties and the time commitment expected. The
lettersareavailable toshareholders toview from the Company
Secretary. The Chairman meets with each Non-executive
Director separately to review individual performance. All Non-
executiveDirectorsaresubject to re-election by shareholders
every three years at the Annual General Meeting and their
appointment can be terminated by either party without notice.
Non-executive Directors received a basic fee of £50,000 plus a
fee of £5,000 per Committee for membership of the Audit and
Remuneration Committee. The Chair of the Remuneration
Committee and Chair of the Audit Committee received a
further £3,000 for their additional responsibilities.
The remuneration of the Non-executive Directors is
determined by the Chairman and the Executive Committee
after considering external market research and individual
contribution. From 1 April 2006, Non-executive Directors will
receive a basic fee of £55,000. For membership of the Audit
and Remuneration Committee, Non-executive Directors receive
an additional fee of £8,000 per committee. To reflect the
increased workload and responsibilities of chairing these
Committees, the Chair of the Remuneration Committee and
Chair of the Audit Committee receive £15,000 in addition to
their basic fee. The Senior Independent Non-executive Director,
Mr R F Chase, who is also the Deputy Chairman, received a total
fee of £100,000 this year. The Chairman and the Executive
Committee agreed to increase this fee to £110,000 from
1 April 2006.
The Remuneration Committee determines the Chairman’s
remuneration, having regard to packages awarded to
Chairmen of other companies of a similar size and complexity.
Mr D E Reid, Non-executive Chairman, received an annual fee
of £500,000 this year and has the benefit of the use of a
company car. The Chairman’s fee has remained the same since
appointment in 2004. The Remuneration Committee decided
to increase this fee to £540,000 from 1 April 2006.
Compliance
In carrying out its duties, the Committee gives full
consideration to best practice. The Committee is constituted
and operated throughout the period in accordance with the
principles outlined in the Listing Rules of the Financial Services
Authority derived from Schedule A and B of the Combined
Code. The auditor’s report set out on page 41, covers the
disclosures referred to in this report that are specified for audit
by the Financial Services Authority. This report also complies
with disclosures required by the Director Remuneration Report
Regulations 2002. Details of Directors’ emoluments and
interests, including executive and savings-related share
options, are set out on pages 30 to 38.
Mr C L Allen
Chairman of the Remuneration Committee