The move is an attempt to compensate for the lack of bonuses paid out after profits at the group's main chain B&Q more than halved last year. It is hoped the new scheme will help the retailer retain its top managers.
Last year, Kingfisher chief executive Gerry Murphy's salary package fell by 18 per cent to£1.1 million, although Murphy's base salary rose by 2.3 per cent to£885,000.
The changes could see Murphy receive up to£1.8 million in shares, although he would not be able to cash them in for three years.
The company's annual report, released yesterday, said: 'Because the entire incentive at Kingfisher is driven from the annual bonus and there is no separate long-term incentive award, the current structure fails to provide sufficient retention incentive for executives in consecutive years when little or no bonus is earned, as can happen in a cyclical downturn.'
Under the new scheme, which will see the annual bonus being separated from the long-term incentive plan, managers will receive annual awards of performance shares. This brings it in line with the practice at other FTSE 100 companies.
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