Tesco 2013 Annual Report Download - page 49

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Tesco PLC Annual Report and Financial Statements 2013
OVERVIEW BUSINESS REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTS
Executive remuneration has been designed to support our strategy
within the framework above. The key features are:
• Alignment with strategy – The majority of our reward is linked
to the delivery of stretching performance over the short and long
term and is delivered in shares. Our medium-term strategic focus
is to build a stronger business that is sustainable and equipped to
compete in the future. The minor changes made to remuneration
arrangements this year reflect our Vision, new Core Purpose, Values
and Strategy.
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 our long-
term strategy.
• Simple, collegiate approach to remuneration – Our remuneration
arrangements are designed to be simple to provide clarity to both
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 our other
shareholders. The CEO is required 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.
Remuneration arrangements throughout the Group
Tesco is one of the largest public company employers in the world.
Our colleagues come from diverse backgrounds reflecting the countries
we operate in and the range of skills we need to run our various
businesses (from stores to banking to telecoms).
Reward packages therefore differ taking into account appropriate factors
but they are all built around the common reward objectives and
principles outlined above.
• Annual bonus – Annual bonuses throughout the Group are linked to
local business performance and Group success in a structure that is
consistent with the Executive Directors’ annual bonus with a focus on
profit growth, strategic financial and strategic non-financial measures.
Linking executive pay with strategy
The world has changed from a culture of ‘more is better’ to ‘better is
better’. This is why we have changed our Core Purpose this year. We can’t
solve the world’s problems but we want to always do the right thing to
earn trust and loyalty from all our stakeholders. Our new Core Purpose
is a statement of what we do and what we stand for – ‘We make what
matters better, together’.
Our Values help us to understand how to put our Core Purpose into
practice. Our Values are: No one tries harder for customers, We treat
everyone how we like to be treated and We use our scale for good.
Our Vision has five elements – each of them describes the sort of
company Tesco aspires to be:
• Wanted and needed around the world
• A growing business, full of opportunities
• Modern, innovative and full of ideas
• Winners locally whilst applying our skills globally
• Inspiring, earning trust and loyalty from customers, our colleagues
and communities
Our seven-part long-term strategy (outlined below) aims to broaden the
scope of the business to enable it to deliver strong, sustainable long-term
growth for all stakeholders.
1. To grow the UK core
2. To be an outstanding international retailer in stores and online
3. To be as strong in everything we sell as we are in food
4. To grow retail services in all our markets
5. To put our responsibilities to the communities we serve
at the heart of what we do
6. To be a creator of highly valued brands
7. To build our team so that we create more value
Further details of this strategy are set out on page 13.
Remuneration is one of our key tools to support the delivery of our
Vision, Core Purpose, Strategy and long-term value creation.
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. Therefore, 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
Fair
•Policies are transparent, and
applied consistently and
equitably
•Reward decisions are trusted
and properly governed
•Reward is legal and compliant
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
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 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
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
Simple
•Reward is simple, clear, and
easy to understand
•We avoid unnecessary
complexity
•Reward is delivered accurately
Total Reward
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