Tesco 2015 Annual Report Download - page 67

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Performance targets for both the annual bonus and Performance Share Plan (where financial measures are used) are set, taking into account
internal budget forecasts, external expectations and the need to ensure that targets remain motivational.
Remuneration arrangements throughout the Group
Remuneration arrangements throughout the Group are based on the same principle: that reward should be sufficient to attract and retain
high-calibre talent without paying more than is necessary and that reward should support the creation of long-term shareholder value and
promote the long-term success of the Company.
Tesco is one of the largest public company employers in the world. Our colleagues undertake a variety of roles reflecting the countries we
operate in and the range of skills we need to run our various businesses. Reward packages therefore differ taking into account location,
seniority and level of responsibility but they are all built around the common reward objectives and principles outlined previously. The
following is based on current practice which may change during the life of the policy.
• Annual bonus – Annual bonuses throughout the Group are linked to business success and individual performance and contribution.
A profit underpin is set below which no bonus awards will be made under the Plan.
• Share incentives – Currently our annual bonus is delivered in a mix of cash and deferred shares to create alignment with shareholder
interests. We have a shareholding policy for the Executive Committee and the next level of management within the business.
• Clawback and malus – Malus provisions exist within our incentive plans to adjust awards prior to release and we will be introducing
clawback provisions into all our executive incentive plans.
• Pensions – Pensions across the Group vary widely according to local market practice. In the UK all Tesco colleagues currently have
the opportunity to participate in a career-average defined benefit scheme. We communicated in January 2015 that we will consult
colleagues on plans to close this scheme and to replace it with an alternative defined contribution plan. This consultation began
in April 2015.
• Colleagues as shareholders – It is an important part of the Tesco Values that all colleagues, not just management, have the opportunity
to become Tesco shareholders. More than 200,000 of our colleagues participate in our all-employee schemes and hold more than
119 million shares in our Share Incentive Plan and more than 127 million options over shares in our Sharesave scheme.
When determining Executive Director remuneration arrangements, the Committee takes into account pay conditions throughout the Group
to ensure that the structure and quantum of Executive Directors’ pay remains appropriate in this context.
Remuneration outcomes in different performance scenarios
Tesco remuneration arrangements have been designed to ensure that a significant proportion of pay is dependent on the delivery of
short-term and long-term goals that are aligned with our short-term and long-term strategic objectives and the creation of shareholder
value. The Committee considers the level of remuneration that may payout in different performance scenarios to ensure that this
is considered appropriate in the context of the performance delivered and the value added for shareholders. The charts below show
hypothetical values of the remuneration package for Executive Directors under three assumed performance scenarios:
Performance scenarios
Maximum award opportunities (% of salary) CEO CFO
Annual bonus 250% 225%
PSP 275% 250%
Minimum • No bonus payout
• No vesting under the Performance Share Plan
On-target performance • 50% annual bonus payout
• 50% vesting under the Performance Share Plan
Maximum performance • 100% annual bonus payout
• 100% Performance Share Plan vesting
CFO – Alan Stewart (£million)
Fixed Pay Annual bonus Long-term incentive
0
1
2
3
4
5
6
7
8
9
MaximumOn-targetMinimum
£998k
36%100% 22%
30%
34% 37%
£2,779k 41%
£4,560k
CEO – Dave Lewis (£million)
Fixed Pay Annual bonus Long-term incentive
0
1
2
3
4
5
6
7
8
9
MaximumOn-targetMinimum
£1,628k
33% 20%
32%
35% 38%
£4,909k
42%
£8,190k
100%
65Tesco PLC Annual Report and Financial Statements 2015
Other informationGovernance Financial statementsStrategic report