Tesco has announced a new approach to executive remuneration which includes common remuneration arrangements with a group focus and the removal of share options.
Announced in Tesco’s 2010/2011 annual report, the new framework will see all executives, including the chief executive officer (CEO) and the US CEO, participate in the same remuneration plans, and all plans employ measures at a group level.
The US CEO will no longer receive annual or long-term awards in respect of the US business.
Executive share options will no longer be granted and will be replaced by a performance share award of comparable expected value.
Tesco will move from its current four long-term incentive plans, with five separate measures, to a single plan with two performance measures: return on capital employed and earnings per share.
The number of performance measures for the annual bonus will also be reduced, from over 20 to seven.
Tesco also announced its biggest ever ‘Shares in success’ payout to staff, with over 225,000 colleagues across the UK receiving a share of a £110 million-plus bonus pot.
The shares award is a thank-you for the commitment and hard work of staff.
Additionally, 71,000 employees who have held shares in the scheme since 2006 also became eligible to sell the £40 million worth of shares they were awarded five years ago tax free.
David Reid, chairman of Tesco, said: “Over the past year we have consulted shareholders for their views on how we reward executive directors.
“We have designed a new structure which is simpler and more collegiate, with clear strategic financial targets, delivering broadly the same levels of remuneration as before but in a better way and more aligned with the interests of our shareholders.
“We will apply the same performance measures through the business to the top 500 Tesco managers, ensuring that shareholder’s interests are embedded throughout the leadership of our business.”
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