Annual report and financial statements 2009
The members of, and advisors to the Remuneration Committee are laid out in the Corporate governance report, in the section titled Remuneration Committee.
The Remuneration Committee considers that the Company’s remuneration policies should encourage a strong performance culture and emphasise long-term shareholder value creation, with clear links between executive performance goals and business strategy. The Committee also believes that there should be a clear reward structure to enable the Company to attract, retain and motivate the best talent who have been and will continue to be key to the Company’s recent success and future performance by:
A substantial proportion of the Executive Directors’ pay is performance-related. The chart below demonstrates the balance between fixed and performance-related pay for the Chief Executive at target and maximum performance levels. Maximum performance assumes the achievement of maximum bonus and full vesting of shares under the LTIP.
Base salary is a fixed cash sum payable monthly in arrears. In order to set the right balance in Executive Directors’ packages, the policy is generally to set salaries around mid-market levels with a substantial proportion being subject to the performance of the business and individuals. The Remuneration Committee has regard to the following when reviewing salary levels:
During the year, base salaries were reviewed in the light of benchmark data, internal relativities and personal performance. As a result, increases were approved for certain Directors.
Current base salaries for the financial year, together with the previous year’s salaries, are set out below:
The increase to Marc Bolland’s base salary, which became effective from 1 August 2008, followed a review carried out by the Remuneration Committee around the time of the second anniversary of his appointment. The review included a comprehensive benchmarking exercise which identified that base salary was significantly below mid-market. Given the base salary positioning, and following consideration of Marc Bolland’s performance during his first two years in role, a mid-year review was deemed appropriate in these exceptional circumstances. Marc Bolland did not receive any further increase in February 2009. Richard Pennycook’s base salary was increased from £519,120 to £540,750 effective from the normal review date of 1 February 2009. Martyn Jones’ base salary was increased with effect from 1 February 2009 from £425,000 to £450,000 reflecting his greater experience since promotion to the Board. Mark Gunter’s base salary, as a result of already being positioned at the mid-market level, was left unchanged. The Remuneration Committee is satisfied that these increases were necessary to enable the Company to pay competitive base salaries and are reasonable in the context of the Directors’ total remuneration packages.
Benefits include health insurance, transport costs and telephone expenses.
The Remuneration Committee operated an annual bonus plan for Executive Directors and other senior managers during 2008/09.
For 2008/09 the maximum bonus was 100% of base salary, with measurement based upon profit before taxation (excluding exceptionals) and personal objectives, as set out below:
|Measures||% of bonus potential|
|Profit before tax, excluding exceptionals||80%|
No bonus was payable for the achievement of personal objectives unless the minimum profit targets had been achieved.
Details of the actual amounts paid for 2008/09 are set out in the Directors’ emoluments table in the Directors’ remuneration report (audited information).
For the 2009/10 annual bonus plan, maximum bonus potential will remain at 100% of base salary.
In addition to profit before tax (excluding exceptionals) and personal objectives, strategic corporate scorecard measures structured around financial objectives, operational excellence, customers and employees have been introduced, as set out below:
|Measures||% of bonus potential|
|Profit before tax, excluding exceptionals||65%|
|Strategic corporate scorecard measures||20%|
No bonus will be payable for the achievement of strategic corporate scorecard measures or personal objectives unless the minimum profit target has been achieved.
Specific performance targets have not been disclosed as they are considered to be commercially confidential but they will be demanding and require performance significantly better than plan for full payout.
The arrangements will be operated for other senior managers on similar terms to the above but at reduced levels.