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Who serves on the Remuneration Committee?

The Committee is chaired by David Rough (Senior Independent Non-executive Director) who replaced Alison Carnwath as Chairman of the Committee upon her appointment as Chairman of the Company in November 2008. The other members are Alison Carnwath and independent Non-executive Directors Sir Stuart Rose and Bo Lerenius. The Human Resources Director provides information and advice to the Committee and takes independent advice from specialist advisors. The Chief Executive and Human Resources Director are invited to attend meetings but no Executive Director is involved in any decisions relating to their own remuneration.

What are the Company’s principles in terms of remuneration for Directors?

Our pay and rewards should attract the best people to the business and incentivise them to produce superior returns for our shareholders. Therefore we believe we should reward people for achieving and exceeding Company targets. This is why a substantial part of our Executive Directors’ reward is performance-related pay, with incentives to exceed industry benchmarks.

There are three key elements to the remuneration we provide:

  • Salaries reflect an individual’s consistent performance and contribution to the business, as defined and decided by the Remuneration Committee. We aim to pay salaries at a mid-market level. Please see page 74 for more details on basic salaries.
  • Annual bonuses reward performance according to a set of key performance indicators, aimed at ensuring the Company delivers on its key priorities for the year. There is a bonus opportunity of up to 100% of basic salary and, at the Remuneration Committee’s discretion, this can be increased to 130%. There is also an additional bonus opportunity of up to 200% of basic salary for exceptional performance. However, no Director may earn a bonus of more than 300% of basic salary in total. Table 52 and Table 53 set out the criteria for each type of bonus.
  • Long-term Incentive Plan rewards for Directors are aligned with our long-term business objectives and the level of value created for shareholders. Please go here for more on long-term incentives.

What were the Executive Directors paid this year?

The Executive Directors received only their base salary in the year. There were no bonus payments, except to Ian Ellis on the completion of the sale of Trillium, and there will be no pay rises.

Table 44 details the salaries and annual bonuses given to our Executive Directors this year.

Why are there no bonuses or salary increases for the Executive team this year?

Our standard policy is that annual bonuses are calculated according to specific criteria for each individual relating to aspects of performance that they can influence directly such as performance against an independent industry benchmark.

Salary levels are set according to market salary levels and the specific role of each Executive Director and are not linked to the Company’s profits in any given year.

Relative performance meant that the Executive Directors would have been entitled to some bonus this year, however in view of the current market circumstances and its impact on the performance of the Company, the Board and the Remuneration Committee agreed that it would not be appropriate for the Executive Directors to receive salary increases or bonuses at the present time. Under the Long-term Incentive Plan (LTIP) the Executive Directors will qualify to receive a proportion of vested shares for meeting set performance conditions over the course of the relevant three year period in line with the Scheme’s rules (see our remuneration policy and philosophy). Ian Ellis, who is no longer a Director of the Company, received a bonus as part of the sale process of Trillium.

Has that been applied across the Company?

We have awarded salary increases in the business but generally only to those employees on lower grades in the organisation where we felt it would be unfairly detrimental to their standard of living to receive no pay rise. The average of this increase was 1.1% across the Group.

With regard to bonuses, we have paid bonuses in the organisation but on a much smaller scale than recent years. This decision was taken because as a business we felt that despite the unprecedented market conditions that impacted the whole sector we need to retain and motivate our people and reward them for some excellent work in challenging circumstances. However, to reflect the current market circumstances and performance of the Group the overall bonus payment was 59% down against last year on a comparable basis after adjustment for the sale of Trillium.

How is share price performance factored into the Directors’ remuneration?

It is factored in through the Long-term Incentive Plan and also through awarding part of the annual bonuses in the form of deferred shares which vest after three years. In addition, all Executive Directors must, within five years of joining the Board, own shares with a value of at least 1.5 x basic salary – and for the Chief Executive 2.0 x basic salary – to ensure their interests are aligned with those of shareholders.

How has the Rights Issue been reflected in the Executive Directors’ share incentive awards?

As envisaged by the rules of the relevant schemes, awards held by all employees under the Group’s share schemes were adjusted as part of the Rights Issue so that the value of their awards was maintained at a constant level. In the case of certain of these schemes, the adjustments were reviewed by the Group’s auditors and approved by HM Revenue & Customs.

For the Executive Directors this meant that for any outstanding share option and LTIP Performance and Matching Shares there was an adjustment made to the number of shares and to the award or option price to reflect the impact of the rights. The value of the shares awarded following these adjustments remains equal to the value of the originally awarded shares.

With regard to pledged co-investment shares which the Executive Directors had to acquire prior to the granting of Matching Share awards, they were required to purchase the rights on their original purchased shares in the scheme in order to trigger the increase in the Matched Share award following the Rights Issue.

How much do you pay Non-executive Directors?

We pay a base fee and in 2007 this was set at £55,000 for two years. Non-executive Directors are paid further amounts for specific duties and responsibilities, such as chairing a Board committee, but are not paid additional fees for attending Board Committee meetings. Please see Table 55 for more information on what we paid our Non-executive Directors this year.