Tesco 2014 Annual Report Download - page 46

How remuneration policy will be applied in 2014/15
Element Operation and opportunity Performance measures
Fixed pay Base salary • CEO – £1,145,000 • n/a
• Next review 1 July 2014.
• The average increase for Executive Directors in 2013 was 2%.
This was the same as the 2% average increases for other colleagues.
Salary increases over the last five years have been aligned with those
of other colleagues.
Pension
(Cash in retirement)
Final salary scheme
• The CEO is a member of the Tesco PLC Pension Scheme,
which provides a pension of up to two-thirds of base salary
on retirement dependent on service (final salary scheme).
SURBS
• The CEO receives the maximum pension that can be provided
from the registered Pension Scheme without incurring additional
tax charges. The balance of his pension entitlement is delivered
through an unfunded retirement benefit scheme (‘SURBS’).
This SURBS is closed to new entrants.
Employee contribution
• The CEO is required to contribute 10% of salary. This rate is in line
with contribution levels for senior management below Board level.
• n/a
Benefits • Core benefits include car benefits, drivers, security, life assurance,
disability and health insurance, club membership and staff discount.
• Executives are eligible to participate in the Company’s all-employee
share schemes, Sharesave and the Share Incentive Plan, on the same
terms as UK colleagues. Sharesave is an HMRC approved savings
related share option scheme. The Share Incentive Plan is an HMRC
approved plan comprising free shares and partnership shares.
• n/a
Performance
related pay
Annual bonus
(One-year
performance)
(Cash and shares)
• CEO – maximum opportunity of 250% of base salary.
• 50% in cash.
• 50% in shares which are deferred for three years.
• Malus applies to deferred shares to allow the Committee.
discretion to scale back awards prior to the satisfaction of awards.
• 76% of bonus based on financial performance:
– 50% of bonus based on trading profit
performance.
– 26% based on selected strategic financial
performance measures (10% Group internet
sales, 8% UK like-for-like sales and 8% Group
working capital).
• 24% of bonus based on performance against
key strategic non-financial performance (8%
Group customer service, 8% Group colleague
engagement, 8% Group CO2 reduction).
• The strategic financial and non-financial
measures are subject to a financial underpin.
Performance
Share Plan
(Three-year
performance)
(Shares)
• CEO – maximum award of 275% of base salary.
• Malus provisions apply to awards, allowing the Committee discretion
to scale back awards prior to the satisfaction of awards.
• Shares vest in three years’ time subject
to performance targets being met.
• The vesting matrix and targets for awards to
be granted in 2014 based on EPS and ROCE
performance for the three years to 2016/17
is set out below:
• At threshold EPS of 3% p.a. and ROCE of 12%,
none of the award will vest.
• The Remuneration Committee reserves the right
to make adjustments to ROCE to take account
of acquisitions or disposals which were not
envisaged when the targets were set but will
only do so when the impact is material.
The CFO, Laurie McIlwee, resigned as Chief Financial Officer and as an Executive Director of Tesco PLC on 4 April 2014. Details of his
leaving arrangements are provided on page 51.
ROCE
EPS growth p.a.
Threshold Stretch
Targets 3% 10%
Stretch
15%
45% Straight-
line
vesting
between
these
points
100%
Threshold
12%
0%
70%
Other information
Governance Financial statementsStrategic report
Tesco PLC Annual Report and Financial Statements 2014 43