GOVERNANCE REPORT
83
Performance will continue to be measured over a three year period. The revised Policy will allow the Remuneration Committee some discretion to make adjustments to the performance conditions and weightings from year-to-year but, for awards made in 2020, it is intended that three performance conditions would apply and the associated targets will be disclosed in the RNS on grant of the LTIP: • Capital (50%) weighted equally between capital coverage ratio and organic capital generation. • Adjusted earnings per share (25%). • Relative TSR (25%) vs FTSE 250. This combination of measures is felt to appropriately reflect the business strategy and objectives over the next three-year period. I hope that you will be able to support the resolutions in the Annual Report at the forthcoming AGM.
Finally, as stated earlier, the Remuneration Committee increased the weighting of the capital measure within the STIP to reinforce its importance from 25% to 50% of the STIP weighting. This reduced the combined weighting of the IFRS profit measures to 25%. The impact of this change increased the outturn of the STIP by 3.3%, however this is more than offset by the discretionary downward adjustment to the outturn of the financial measure explained above. Summary of remuneration for David Richardson in respect of 2019, £’000
Salary
£545
Deferred variablE
Benefits Pension
£23 £62
27% fixed casH 42%
STIP – cash
£183 £224 £456
STIP – deferred
LTIP
variable casH 31%
IMPLEMENTATION OF THE REMUNERATION POLICY FOR 2020 The Remuneration Committee agreed that David Richardson would receive a salary increase with effect from 1 April 2020. The level of increases for senior management and the general employee population eligible to be considered for an increase was broadly 2.42%. David Richardson received a salary increment of 2.05%, below those of the average employee. The maximum STIP opportunity continues to be 150% of base salary for Executive Directors, subject to stretching corporate financial and personal non-financial measures. For 2020 the element of the STIP which is deferred will be increased to 40%. For 2020 the Committee has reviewed the STIP performance measures and determined a new assessment framework. We propose aligning 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. This means personal objectives would no longer be weighted separately within the scorecard but would act as a modifier to the corporate result. While not expected in the normal course, the Committee retains the flexibility to pay up to 20% of the maximum bonus opportunity based on personal performance only (reduced from the current 33%). Under the revised Policy, the normal LTIP award level to the CEO has been reduced from 200% of salary to 150% of salary, in line with the award level used for the other Executive Director. As both executives will be new in role, we envisage using the prevailing share price for the 2020 grant unless the Committee deems this would result in an inappropriate number of shares being granted at the time of making the award. In 2020 and in subsequent years, the Committee will consider the most appropriate approach based on a holistic view of share price performance at the time. We have considered carefully this position and are acutely aware of the importance of striking a balance between, on one hand, reducing award levels to prevent potential windfalls and, on the other hand, maintaining a meaningful incentive for the new leadership team to drive the Group forward under difficult economic and regulatory conditions.
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