FTSE 100 company moves away from share price as a trigger for remuneration and requires executive directors to hold more shares
In its annual report and accounts published on 31 May 2011, Tesco plc announced comprehensive changes to the structure of executive director remuneration. The most notable of these changes, as set out in the directors’ remuneration report, are:
- Share option schemes are removed for executive directors.
- There will be only one long-term incentive plan and that plan will have only two performance measures, described as “a matrix of stretching earnings growth targets and sustainable return on capital employed”.
- The annual bonus plan metrics are reduced to seven measures – none of which are based on Tesco’s share price – from more than 20 individual measures.
- There will be the potential for the clawback of deferred share awards under both the annual bonus plan and the long-term incentive plan “in the event that results are materially misstated”.
- “Executive shareholding guidelines” (i.e. the number of shares executive directors are required to hold) are increased to four times salary for the CEO and three times salary for other executive directors.
At the Tesco AGM in 2010, 47% of votes cast were either voted against or withheld on the vote to approve the remuneration report.
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