Directors’ remuneration report
Statement of the Company’s policy on directors’ remuneration
Key principles of the remuneration policy
The remuneration policy applied by the committee is based on the need to attract, reward, motivate and retain executive directors to enable the Company to achieve its plans. The committee is also conscious of the need to avoid paying more than is reasonable for this purpose and therefore the policy of the committee is to pay remuneration at market levels. The remuneration policy is designed to ensure that a significant proportion of the executive directors’ remuneration is linked to performance, through the operation of the annual cash bonus and the long-term incentive plan.
Chairman
The Chairman was Executive Chairman, devoting three days a week to his role with the Company, until 22 October 2008 when he became non-executive Chairman and, in consequence, his remuneration was adjusted. Until October 2008 his remuneration consisted of a basic salary, pension allowance and other benefits, including a company-leased car and medical cover for him and his immediate family. With effect from October his salary was reduced from £385,000 to £250,000 a year and his benefits were phased out in the period up to 31 December 2008, with the exception of the car which may be retained until the end of the Company’s lease. He continues his existing participation in a long-term incentive plan at a reduced level but will not receive any further awards under the Company’s equity incentive schemes.
Executive directors
The executive directors’ remuneration consists of a basic salary, an annual cash bonus (subject to performance conditions) and other benefits, including pension arrangements and participation in a long-term incentive plan. They are provided with company-leased cars and, if they so elect, a fuel card (or a cash alternative), long-term disability cover under the Company’s permanent health policy and medical cover for them and their immediate families. Benefits in kind and bonuses are not pensionable.
The committee normally reviews the executive directors’ remuneration annually with effect from 1 January. When the Chief Operating Officer was promoted to Chief Executive Officer in October 2008 his salary was increased to £450,000 a year. The Finance Director received an interim review in July 2008 and his salary was increased to £250,000 a year. However, in view of more difficult economic conditions, no general increases in basic salary were awarded either to the executive directors or the senior management group with effect from 1 January 2009.
Non-executive directors
The fees for the non-executive directors are fixed by the board and are designed both to recognise the responsibilities of non-executive directors and to attract individuals with the necessary skills and experience to contribute to the Company’s plans. Their business expenses are reimbursed by the Company. They received no increase in fees in 2008 or for 2009.
Bonuses
An annual cash bonus is payable to the Chief Executive Officer and the Finance Director, subject to satisfaction of performance conditions which include, where applicable, appropriate environmental, social and governance matters. During 2008 the executive directors were eligible for a bonus by reference to post-tax profit and personal objectives, subject to a maximum of 100% of salary.
For 2009 a new scheme is proposed for executive directors subject, in the case of the share element, to shareholder approval. The bonus will be payable partly in cash, and partly in deferred shares which will vest at the end of a three-year period subject to the director not being dismissed for misconduct. There will also be a matching award of shares which will vest at the end of a three-year period, subject to a performance condition being satisfied. The performance condition will be determined by the committee at the time of grant. Further details are contained in the Chairman’s letter to shareholders to be dated 31 March 2009. Bonuses do not form part of pensionable earnings. A similar scheme, at reduced levels, will operate for approximately 45 senior managers.