GOVERNANCE REPORT
79
Executive Director changes From 1 January 2020, we welcomed Andy Parsons to the Board as the Group Chief Financial Officer. Andy was appointed with a base salary of £415,000, broadly in line with his predecessor. The Committee believed this reflected Andy’s extensive experience. Details of Andy’s buyout arrangements were disclosed in last year’s Directors’ Remuneration Report. Base salaries Salaries for Executive Directors are reviewed with effect from 1 April each year along with those of the overall employee population. As disclosed last year, the Executive Directors in post received an average salary increase of 2.05%with effect from 1 April 2020, which was below the 2.42% average increase received by other employees. Pension The Executive Directors received cash payments in lieu of the Company pension of 10% of salary, aligned to the contribution available to the majority of the wider workforce. Short Term Incentive Plan Page 82 details the targets and outcomes relating to 2020. For performance in 2020 the Committee approved awards for David Richardson at 85% of maximum and for Andy Parsons at 80% of maximum. These payments reflect their strong personal performance and delivery of solid financial results in a challenging year for the business. In line with the policy, 60% of the Executive Directors’ STIP will be paid in cash and 40%will be deferred into Just Group shares for three years under the Deferred Share Bonus Plan (“DSBP”). The table below illustrates performance against the STIP performance measures. From 2020, the Committee aligned the operation of the balanced scorecard in the new policy with the wider business, where the core bonus opportunity is determined through a basket of financial and strategic performance measures and is then distributed to Executive Directors against their achievement of their personal objectives. Details of key achievements are provided on page 83.
The Remuneration Committee, on the recommendation of David Richardson, applied its discretion to moderate the bonus pool, however were careful to ensure that the incentive schemes rewarded strong underlying performance. In addition, awards under the LTIP in 2020 were the first to be granted with a reduced normal award level for the CEO of 150% of salary, in line with best practice. 2020 has been David Richardson’s first full financial year as Group Chief Executive Officer and Andy Parsons’ first financial year as Group Chief Financial Officer. As Remuneration Committee Chair, I would like to extend my thanks to Chris Gibson-Smith, who was a valued member of the Committee in addition to his role as Group Chair, prior to his resignation from the Board during the year. I was pleased to welcome both Michelle Cracknell and
John Hastings-Bass to the Committee in 2020. Remuneration Committee membership in 2020
Member
Appointment period Meetings attended
Ian Cormack (Chair) John Hastings-Bass Chris Gibson-Smith
4 April 2016 – present 13 August 2020 – present 4 April 2016 – 13 August 2020
7/7 3/3 4/4 7/7 3/3
Steve Melcher
15May 2016 – present 14May 2020 – present
Michelle Cracknell
REMUNERATION COMMITTEE 2020 The Committee is made up exclusively of independent Non-Executive Directors. The terms of reference are available on the Company website. The focus of the Committee includes the remuneration strategy and policy for the whole Company as well as the Executive Directors. The key activities of the Committee during the year included: • review and approval of the Directors’ Remuneration Report; • approval of the grant of the 2020 awards and performance conditions under the Long Term Incentive Plan; • assessment of the performance of the Executive Directors against the 2020 corporate financial, non-financial and personal performance outturns, in relation to their annual bonus, in the context of wider Company performance and approving the payments; • approval of the list of colleagues with responsibilities categorised under Solvency II and the treatment of their variable pay under the regulations; • review and approval of bonus plans across the Group, where they are not aligned to the Group STIP Plan or Group LTIP Plan; • review and approval of the all employee remuneration policy for 2021; • review of the Company’s gender pay gap data; and • monitoring the developments in the corporate governance environment and investor expectations. REMUNERATION IN 2020 At the AGM in May 2020, a new Directors’ remuneration policy was approved with 89% of votes in favour and our advisory vote on the Directors’ Remuneration Report was approved with 91% of votes in favour. Given Just Group’s resilience through the challenges of 2020, the Remuneration Committee believes the policy operated well in 2020 and is not suggesting any changes to the approved policy for 2021. In particular, the increased focus on the Group’s capital position within the Executives’ pay arrangements continues to reflect the Group’s priorities for 2021. adjusted during the year to take account of the impact on the economic environment. Despite these external challenges David and his team have delivered an exceptional set of results in 2020, demonstrated by the STIP outturn of 87.3% of maximum. The financial performance measures were achieved at 89.8% of maximum and the strategic performance measures, which provide a neutral or downward modifier to the financial outturn, reduced the final STIP outturn by 2.5%. The Board approved a challenging business plan for 2020, before COVID-19 emerged. The measures for the STIP and LTIP were not
Financial performance measure
Organic capital generation
Cost base reduction
New business profit
Adjusted operating profit
Weighting 50% 20%
15%
15%
Outturn
£221m £17m
£199m £239m
Achievement 100% 87%
49%
100%
Strategic performance measure Adjustment
Business transformation
Customer
People
0
–2.5% 0
Aggregate scores: Corporate outturn 87.3% David Richardson
85.0% -2.3% 80.0% -7.3%
Andy Parsons
The Committee is satisfied that this level of bonus payout is reflective of the financial performance delivered and the significant progress made against the Company’s strategic objectives, balanced with the significant external challenges. Long Term Incentive Plan In March 2020, awards under the LTIP were made to David Richardson and Andy Parsons over shares worth 150% of base salary, in line with the normal award level under the new policy. This reflected the reduced normal award level for the CEO from 200% of salary under the previous policy. For the first time, these LTIP awards included capital self- sufficiency measures, with 25% of the LTIP measure based on the Group’s solvency capital ratio and 25% based on organic capital generated. The balance will be measured based on total shareholder return (“TSR”) performance compared with the constituents of the FTSE 250 and adjusted earnings per share (“EPS”) performance (each for 25% of the LTIP).
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