Tesco 2010 Annual Report Download - page 59

Remumeration report
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 experience and knowledge which can benefit Tesco.
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 which include details of any outside
appointments can be found on pages 36 and 37 of this Report. Fees
retained for any Non-executive directorships are set out below.
Company in which Fee retained
Non-executive in 2009/10
Director directorship held £000
Philip Clarke Whitbread PLC 55
Andrew Higginson BSkyB PLC 63
Lucy Neville-Rolfe The Carbon Trust 18
Non-executive Directors
Non-executive Directors have letters of appointment setting out their
duties and the time commitment expected. The letters are available to
shareholders to view from the Company Secretary upon request.
The Chairman meets with each Non-executive Director separately to
review individual performance. All Non-executive Directors are subject
to re-election by shareholders every three years at the Annual General
Meeting and their appointment can be terminated by either party without
notice. The remuneration of the Non-executive Directors is determined
by the Chairman and the Executive Committee after considering external
market research and individual contribution. Non-executive Directors
receive a basic fee of £65,000 per annum. The Chairs of the Audit and
Remuneration Committees receive £30,000 (in addition to their basic
Non-executive fee) and Non-executive Directors who are members of
these Committees receive an additional £12,000 for each Committee.
The Senior Independent Director, Rodney Chase, who is also the Deputy
Chairman, receives a total fee of £135,000 per annum. The Remuneration
Committee determines the Chairman’s remuneration, having regard to
time commitment and packages awarded to Chairmen of other companies
of a similar size and complexity. David Reid, Non-executive Chairman,
receives an annual fee of £610,000 and has the benefit of a company car
and chauffeur.
The Remuneration Committee
The Remuneration Committee (the Committee) is governed by formal
Terms of Reference which are reviewed annually. The Terms of Reference
are available from the Company Secretary upon request or can be viewed
at www.tesco.com/boardprocess
Composition of the Committee
The Committee consists entirely of independent Non-executive Directors.
The members of the Committee during the year were Charles Allen
(Chairman of the Committee), Patrick Cescau, Rodney Chase, Karen Cook,
Harald Einsmann and Ken Hanna. Ken Hanna was appointed a member of
the Remuneration Committee effective from 1 April 2009. The Directors’
biographies can be found on pages 36 and 37 of this Report.
No member of the Committee has any personal financial interest in the
matters being decided, other than as a shareholder, nor any day-to-day
involvement in running the business of Tesco. Jonathan Lloyd, the Company
Secretary, is Secretary to the Committee. David Reid, Non-executive
Chairman, Sir Terry Leahy, Chief Executive of the Group and Laurie McIlwee,
Group CFO, all attend meetings at the invitation of the Committee. They
are not present when their own remuneration is being discussed.
The Committee is supported by the Group Personnel and Finance
functions and has continued to use the services of Deloitte LLP whom it
appointed as an external, independent advisor. Deloitte LLP also provided
advisory services in respect of corporate tax planning, share schemes,
international taxation, corporate finance and treasury to the Group during
the year. Members’ attendance at Committee meetings is listed in the
Corporate Governance section on page 47 of this Report.
To find out more go to www.tesco.com/annualreport2010
Role of the Committee
The Committee’s purpose is to:
• determine and recommend to the Board the remuneration policy for the
Chairman and Executive Directors;
• ensure the level and structure of remuneration is designed to attract,
retain, and motivate the Executive Directors needed to run the Company;
• agree performance frameworks and targets, and review performance
against these;
• monitor the level and structure of remuneration for senior management
ensuring it is aligned with shareholders interests; and
• ensure the remuneration relationship between the Executive Directors
and senior executives of the Company below this level is appropriate.
The Committee normally meets at least four times a year and has a rolling
schedule of items within its remit. In the financial year ended 27 February
2010 the Committee met 7 times, and there was also an off-site meeting
to consider remuneration strategy.
Key activities
During the year, the key activities of the Committee included:
• approval of the 2008/09 Directors’ Remuneration Report;
• review and approval of awards made under the Executive Incentive Plan,
Performance Share Plan and Discretionary Share Option Plan;
• annual review of all elements of the Executive Directors’ reward
packages, and those of senior management;
• review of all share plan performance measures against 2008/09
performance targets;
• agreement of final vesting amounts of the 2006 Performance Share
Plan Award, and 2006 Discretionary Share Option Plan award;
• design and targets for 2009/10 Annual Bonus;
• consideration of targets for the 2009 Performance Share Plan;
• review of its performance and agreement of steps to enhance its
effectiveness;
• review of compliance with director shareholding guidelines ;
• consideration of developments in best practice and updated guidelines
on executive compensation from shareholder advisory bodies; and
• review of the Chairman’s pay and benefits.
Governance Oversight Committee
The Governance Oversight Committee (GOC) has been established
to review and report at the end of each financial year on the allocation
of capital and other Group resources. The GOC comprises the Senior
Independent Director of the Company (who chairs the GOC), the
Chairman of the Audit Committee and the Chairman of the Remuneration
Committee. The Chairman of the Group also attends the GOC and the
Company Secretary serves as its secretary. The GOC reports its findings
to the Remuneration Committee each year. The Remuneration Committee
takes these into account, along with the view of the Audit Committee,
to ensure that financial performance against targets is indicative of strong
and robust business performance. If appropriate, vesting under the
plans may be adjusted by the Remuneration Committee (in respect of
Executive Directors) or the Board (in respect of all other employees who
are participants). In accordance with the Combined Code, any such
adjustments to vesting for Executive Directors will be reported to
shareholders in the Directors’ Remuneration Report at the relevant time.
Compliance
In carrying out its duties, the Remuneration Committee gives full
consideration to best practice. The Committee was constituted and
operated throughout the period in accordance with the principles outlined
in the Listing Rules of the Financial Services Authority derived from the
Combined Code on Corporate Governance. The auditors’ report, set out on
page 69, covers the disclosures referred to in this report that are specified
for audit by the Companies Act 2006. This report also complies with
disclosures required by the Director Remuneration Report Regulations
2002. Details of Directors’ emoluments and interests are set out on
pages 58 to 66 of this Report.
Charles Allen
Chairman of the Remuneration Committee
Tesco PLC Annual Report and Financial Statements 2010 57