GOVERNANCE REPORT
81
External assistance provided to the Committee The Executive Compensation practice of Aon plc (“Aon”) is retained as the independent adviser to the Remuneration Committee. Aon also provides reinsurance broking to the Group and advises clients of the Group’s Defined Benefit Solutions business. The Committee is satisfied that the protocols and systems in place at Aon and the independence of advice received ensures that this does not create a conflict of interest. Aon was appointed by the Committee to provide advice and information. Aon is a signatory to the Remuneration Consultants’ Code of Conduct, which requires that its advice be objective and impartial. The total fees paid to Aon for providing advice and information related to remuneration and employee share plans to the Committee during the year were £121,876. The fees are predominantly charged on a “time spent” basis. Internal assistance provided to the Committee The Group Chief Executive Officer and other senior management, including the Group HR Director and the Group Chief Risk Officer, were invited to attend meetings as the Committee considered appropriate, but did not take part in discussions directly regarding their own remuneration. DIRECTORS’ REMUNERATION POLICY REVIEW Our existing Directors’ Remuneration Policy (the “Policy”) was approved by over 96% of our shareholders in 2017. The reporting regulations require us to seek shareholder approval for a new Policy every three years and, therefore, a new Policy will be submitted for shareholder approval at our Annual General Meeting in 2020. The Committee took time during 2019 to consider carefully any changes required to the Policy to ensure it best supports the strategy of the business. Capital is the Group’s number one priority and the Board remains focused on delivering a sustainable capital model, while in parallel continuing to develop other strategic and business options to enhance shareholder value. The Remuneration Committee has reflected these priorities in its proposed approach to remuneration from 2020, in particular through the introduction of a capital measure within the Long Term Incentive Plan (“LTIP”). Corporate governance around pay has developed since our last Policy approval and we are proposing to make a number of changes to our Directors’ Remuneration Policy which reflect good practice. The Policy is compliant with the Solvency II remuneration regulations and the key points of our proposed new Policy are outlined below. Proposed changes • Pensions – reduced the pension allowance for current and any future Executive Directors from 15% of salary to 10% of salary to align with the majority of Just Group employees • Benefits – introduced additional flexibility to pay certain relocation and/or travel benefits as considered necessary to facilitate an appointment • STIP – increased the portion which is deferred into shares to 40% (from one-third previously), increasing alignment with shareholders and reflecting best practice for financial service companies. Some changes are proposed to the balance and use of performance measures • LTIP – reduced the normal award level for the Chief Executive Officer to 150% of salary, in line with the award levels for other Executive Directors. An additional measure (a sustainable capital model) will be added for the 2020 award • Shareholding guidelines – extended beyond cessation, with the full guideline continuing to apply for two years following cessation of employment. Deferred bonus shares and shares under the LTIP which have vested but are subject to a holding period will count towards these guidelines where they have been awarded in 2020 and beyond.
The proposed changes were the subject of consultation with our largest shareholders and with prominent proxy agencies. The feedback received was positive and some changes were made to the original proposals as a result. Our shareholders strongly supported the focus on our capital position within the Policy and the LTIP, in particular. The Committee feels that the changes proposed are appropriate in the context of the challenges the business is facing and reflect developments in best practice since our Policy was last renewed. REMUNERATION IN 2019 At the AGM in May 2019, our advisory vote on the Directors’ Remuneration Report was approved by 87% of votes in favour. We were keen to understand shareholder concerns and, in large part, we consider this to have been in response to the capital raising in March 2019. Payouts under the 2018 STIP reflected our strong operating performance but some shareholders felt that the STIP did not adequately reflect the regulatory challenges faced by the Company. We sought to address this concern in 2019 by taking into account both IFRS performance and organic capital generation in the STIP financial measures, and will continue to do so in 2020. The Committee considered the feedback received from shareholders when determining remuneration outcomes for 2019, and in the development of the proposed Directors’ Remuneration Policy. Board changes Since October 2018, when Simon Thomas departed as Group Chief Financial Officer, Just Group has seen a number of Board changes. As reported last year, David Richardson took on the role of Interim Chief Financial Officer in addition to his role of Deputy Group Chief Executive Officer and MD, UK Corporate Business from October 2018. On 30 April 2019, Rodney Cook stepped down as Group Chief Executive Officer and David Richardson agreed to act as Interim Group Chief Executive Officer, while receiving no uplift to his base salary for the additional roles of Interim Group Chief Financial Officer or Interim Group Chief Executive Officer. Rodney Cook retired from the Company and was treated as a good leaver, reflecting his successful leadership of the organisation during his nine year tenure. The leaving arrangements for Rodney Cook are detailed in the Annual Report on Remuneration. On 19 September 2019, the Board was pleased to announce David’s appointment as Group Chief Executive Officer. The Remuneration Committee reviewed David’s base salary on his appointment and determined that his base salary should increase to £585,000, 14% lower than his predecessor. The Remuneration Committee felt that this should be backdated to 1 May 2019, when David first took on the role on an interim basis and will be reviewed as his experience develops in this role. 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. Given the passage of time, the Committee believes this to be appropriate, given Andy’s extensive experience. In accordance with the Listing Rules, details of his buyout arrangements are disclosed later in this report on page 93. Pension arrangements for both Executives were aligned with those of Just Group employees at 10% of salary (reduced from 15% of salary under the existing Policy). 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 1.9% with effect from 1 April 2019, which was below the 2.45% average increase received by other employees.
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