Tesco 2015 Annual Report Download - page 65

Element Purpose and
link to strategy
Operation Maximum
opportunity
Performance
measures
Changes from
previous policy
Benefits
continued
• The Committee may remove benefits
that Executive Directors receive
or introduce other benefits if it is
considered appropriate to do so
• Executive Directors shall be
reimbursed for all reasonable
expenses and the Company may
settle any tax incurred in relation
to these
• All-employee share plans –
Executive Directors are eligible
to participate in the Company’s
all-employee share schemes on
the same terms as UK colleagues
• Mobility policy – Where an
Executive Director is required
to relocate to perform their role,
our policy is that they may be
offered some or all of the following:
a relocation allowance, location
allowance, cost of living allowance,
disturbance allowance, housing
benefit, flight budget, assistance
with school fees, international family
healthcare, pension allowance,
spousal allowance and tax advice,
assistance and equalisation.
The level of such benefits would
be determined based on the
circumstances of the individual
and typical market practice
Annual bonus • The role of the annual
bonus is to reward
Executive Directors
for the delivery of
our annual financial,
operational and
strategic goals
• The performance
measures have been
selected as they are
considered to be key
to delivering long-term
shareholder value
creation
• Deferral into Company
shares provides
alignment with
shareholders
• The malus and clawback
provision enables the
Company to mitigate
risk (see page 64)
• The annual bonus is normally
delivered:
– 50% in cash
– 50% in shares which are deferred
• Awards will be calculated based
on a percentage of base salary
and the market share price at
grant in accordance with the rules
• The Committee may determine
that a different balance of cash
and deferred shares may apply
• Performance is assessed over a
financial year
• The Committee determines the
level of bonus taking into account
performance against targets and
the underlying performance
of the business
• The deferred shares will
normally vest after three years
(or an alternative period
determined by the Committee)
• Deferred shares are normally
awarded in the form of nil cost
options but may be awarded
in other forms (such as conditional
share awards or forfeitable shares).
Vested nil cost options may normally
be exercised until the tenth
anniversary of the date of grant
• Maximum annual bonus
opportunity of 250%
of base salary
• For details of award levels
for 2015/16 see the Annual
Remuneration Report on
page 49
• The annual bonus may be
based on a mix of financial,
operational, strategic and
individual performance
measures. At least 70%
of the bonus will be based
on financial performance
• Any portion of the bonus
based on non-financial
measures will be subject
to meeting a financial
underpin
• The Committee determines
the exact metrics each year
depending on the key goals
for the forthcoming year
• Normally around 30% of the
bonus is paid for threshold
performance, around 50%
of the bonus is paid if target
levels of performance are
delivered with the full bonus
being paid for delivering
stretching levels of
performance. These vesting
levels may vary each year
depending on the stretch
of targets set
• The Committee sets bonus
targets each year to ensure
that they are appropriately
stretching in the context
of the business plan
• The policy has been
amended to reflect
the introduction
of individual
performance metrics
into the bonus plan
• The policy has been
amended to reflect
the introduction of
clawback to future
awards
Performance
Share Plan
• The role of the PSP
is to reward Executive
Directors for achieving
Tesco’s long-term
strategy and creating
sustainable shareholder
value
• To align the economic
interests of Executive
Directors and
shareholders
• To act as a retention tool
• The malus and clawback
provision enables the
Company to mitigate
risk (see page 64)
• Awards normally vest based on
performance over a period of not
less than three years (unless the
Committee determines otherwise)
• Awards will be calculated based on
a percentage of base salary and the
market share price at grant in
accordance with the rules
• The Committee has the discretion
to amend the final vesting level if
it does not consider that it reflects
the underlying performance of
the Company
• PSP awards are normally awarded
in the form of nil cost options over
shares but may be awarded in other
forms (such as conditional share
awards or forfeitable shares). Vested
nil cost options may normally be
exercised until the tenth anniversary
of the date at grant
• The maximum annual award
that can be granted under the
PSP is 350% of base salary
• For details of award levels
for 2015/16 see the Annual
Remuneration Report on
page 49
• Awards vest based on Total
Shareholder Return, financial
or strategic performance
conditions (the satisfaction
of which is determined by the
Committee). At least 50% of
the PSP will be based on TSR
and/or financial metrics
• For threshold levels of
performance up to 25% of
the award vests, increasing
to 100% of the award for
stretching performance
• The Committee sets targets
each year so that targets are
stretching and represent value
creation for shareholders
while remaining motivational
for management
• The policy has been
amended to reflect
the changes in
performance condition,
targets and vesting
levels and to allow
more flexibility for
measures to evolve
further in future years
• The policy has been
amended to reflect
the introduction of
clawback to future
awards
63Tesco PLC Annual Report and Financial Statements 2015
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