Tesco has revealed that the contract of its chief executive Sir Terry Leahy has been reduced from the previous two-year deal to a rolling one-year deal.
Sir Terry has overseen Tesco's rise to the top
The move - in-line with industry best practice - follows shareholder objections to the two-year contract.
Tesco, which Sir Terry has cemented as the biggest UK supermarket, announced the change in a letter to shareholders.
Sir Terry's basic salary in 2002/03 was £916,000, but he received £2.84m following bonuses.
He is said to have been fully in favour of the switch to a one-year contract.
A Tesco spokesman said: "This gets us into line with best practice".
At Tesco's annual general meeting last year up to 40% of shareholders failed to back the firm's remuneration report.
One investor said at the time that the board's arrangements were "an obscenity and out of touch with current thinking".
Two-year contracts for senior executives have become increasingly rare in corporate UK due to shareholder opposition.
Investors feel that directors on two-year deals stand to get higher payouts if they lose their jobs, something critics have dubbed "rewards for failure".