Tesco 2015 Annual Report Download - page 59

On termination of employment, in accordance with the terms of his contract, Laurie McIlwee was entitled to receive a termination payment
of £970,880 consisting of 12 months’ base salary (£886,420) and benefits (£84,460 consisting of colleague discount, private healthcare
and health insurance, and car and car-related benefits). In addition, a payment of £15,000 net (£27,273 gross) was made to him in lieu of
private medical benefits. The payment of this amount plus interest at the rate of 2% above the Barclays Bank Base Rate for the period from
31 October 2014 to the date of payment, totalling £1,004,853, was made on 6 February 2015. No additional amount will be paid in respect
of pension. Should it be determined in the future that there was gross misconduct, the Company will seek recovery of the termination
payment. Tesco also paid £47,000 towards Laurie McIlwee’s legal fees incurred in relation to the termination of his employment.
Laurie McIlwee did not receive a bonus in respect of 2014/15. He has until 3 October 2015 to exercise vested deferred bonus awards.
The 2012 award (39,775 shares) in respect of 2011/12 performance will vest on 25 May 2015 and he will have 12 months from this date
to exercise this award. No deferred share awards were made in respect of 2012/13 or 2013/14.
The PSP award granted to Laurie McIlwee in 2011 (524,719 shares) lapsed on 14 July 2014 as performance conditions were not met. PSP
awards granted to him in 2012 (655,388 shares) and 2013 (554,498 shares) lapsed upon him leaving the business. He may exercise the
vested PSP award granted in 2009 (136,067 shares) until 3 October 2015. He may exercise vested discretionary share option awards granted
in 2007 (77,192 shares), 2008 (91,335 shares) and 2009 (325,059 shares) until 3 October 2015. These share option awards are, however,
currently underwater.
Shares held under the all-employee Share Incentive Plan (11,956 shares) were transferred from the Trust on 20 October 2014 in accordance
with the rules of the plan.
The Company will pay for outplacement services up to a maximum of £50,000 excluding VAT.
Other policy information
Risk management
When developing our remuneration structures, the Committee considered whether any aspect of these might encourage risk taking
or inappropriate behaviours that are incompatible with our Tesco Values and the long-term interests of shareholders. Ifnecessary, the
Committee would take appropriate steps to address this.
Outside appointments
Tesco recognises that its Executive Directors may be invited to become Non-executive Directors of other companies. Such Non-executive
duties can broaden a Director’s experience and knowledge which can benefit Tesco.
Subject to approval by the Board, Executive Directors are allowed to accept Non-executive appointments, provided that these appointments
are not likely to lead to conflicts of interest, and they may retain the fees received. Dave Lewis is a Non-executive Director of British Sky
Broadcasting Group Plc and received fees of £98,500 during the year. Alan Stewart is a Non-executive Director of Diageo Plc and received
fees of £42,625 during the year.
Funding of equity awards
Executive incentive arrangements are funded by a mix of newly issued shares and shares purchased in the market. Where shares are newly
issued, the Company complies with Investment Association dilution guidelines on their issue. The current dilution usage of discretionary
plans is c.2.9% of shares in issue. Where shares are purchased in the market, these may be held by Tesco Employees Share Schemes Trustees
Limited, in which case the voting rights relating to the shares are exercisable by the Trustees in accordance with their fiduciary duties.
At 28 February 2015 the Trust held 3,028,852 shares.
Other disclosures
Change in CEO remuneration compared to the change in colleague remuneration
The following table illustrates the change in CEO salary, benefits and bonus between 2013/14 and 2014/15 compared to other UK colleagues.
The Committee decided to use other UK colleagues for the purpose of this disclosure as over half of our colleagues are based in the UK and
the CEO is also predominantly based in the UK (albeit with a global role and responsibilities). The Committee therefore considered that this
is an appropriate comparator group given that pay changes across the Group depend on local market conditions.
Salary Benefits Bonus
CEO 0% (32)%*0%
UK colleagues 1.5% 0% 0%
* Benefits exclude one-off costs in relation to appointment for Dave Lewis of £65,000 gross.
57Tesco PLC Annual Report and Financial Statements 2015
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