GOVERNANCE REPORT
87
Internal appointments In the case of an internal Executive Director appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms and adjusted as relevant to take into account the appointment. In addition, any other on-going remuneration obligations existing prior to appointment may continue, at the discretion of the Remuneration Committee. Recruitment policy on appointment of a new Chair or Non-Executive Director For a new Chair or Non-Executive Director, the fee arrangement would be set in accordance with the approved remuneration policy in force at that time. DIRECTORS’ TERMS OF EMPLOYMENT AND LOSS OF OFFICE Executive Director service agreements and notice periods The Executive Directors have entered into service agreements with an indefinite term that may be terminated by either party on six months’ written notice. Contracts for new appointments will normally be terminable by either party on a maximum of six months’ written notice. In certain circumstances the notice period may be 12 months, reducing to six months within 18 months of appointment. An Executive Director’s service contract may be terminated summarily without notice and without any further payment or compensation, except for sums accrued up to the date of termination, if they are deemed to be guilty of gross misconduct or for any other material breach of the obligations under their employment contract. The Group may suspend an Executive Director or put them on a period of garden leave during which they will be entitled to salary and benefits. If the employment of an Executive Director is terminated in other circumstances, compensation is limited to base salary due for any unexpired notice period and any amount assessed by the Committee as representing the value of other contractual benefits which would have been received during the period. At the Company’s discretion, a payment in lieu of notice (“PILON”) may be made. Such PILON payments will normally be phased and subject to mitigation. The Group may choose to continue providing some benefits instead of paying a cash sum representing their cost. Any statutory entitlements or sums to settle or compromise claims in connection with a termination (including, at the discretion of the Committee, reimbursement for legal advice and provision of outplacement services) would be paid as necessary. Executive Directors’ service contracts are available for inspection at the Group’s registered office during normal business hours and will be available for inspection at the AGM. Chair and Non-Executive Director letters of appointment All Non-Executive Directors have letters of appointment with the Group for an initial period of three years, subject to annual re-election by the Group at a general meeting. Directors’ letters of appointment are available for inspection at the registered office of the Group during normal business hours and will be available for inspection at the AGM. The Chair’s appointment may be terminated by either party with six months’ notice. It may also be terminated at any time if he is removed as a Director by resolution at a general meeting or pursuant to the Articles, provided that in such circumstances the Group will (except where the removal is by reason of his misconduct) pay the Chair an amount in lieu of his fees for the unexpired portion of his notice period. The appointment of each Non-Executive Director may be terminated at any time with immediate effect if he/she is removed as a Director by resolution at a general meeting or pursuant to the Articles. The Non-Executive Directors (other than the Chair) are not entitled to receive any compensation on termination of their appointment.
COMMITTEE DISCRETIONS The Committee operates the Group’s various incentive plans according to their respective rules. To ensure the efficient operation and administration of these plans, the Committee retains discretion in relation to a number of areas. Consistent with market practice, these include (but are not limited to) the following: • selecting the participants; • the timing of grant and/or payment; • the size of grants and/or payments (within the limits set out in the Policy table above); • the extent of vesting based on the assessment of performance; • determination of a “good leaver” and where relevant the extent of vesting in the case of the share-based plans; • treatment in exceptional circumstances such as a change of control, in which the Committee would act in the best interests of the Group and its shareholders; • making the appropriate adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events, variation of capital and special dividends); • cash settling awards in exceptional circumstances; and • the annual review of performance measures, weightings and setting targets for the discretionary incentive plans from year to year. Any performance conditions may be amended or substituted if one or more events occur which cause the Committee to reasonably consider that the performance conditions would not, without alteration, achieve their original purpose. Any varied performance condition would not be materially less difficult to satisfy in the circumstances. REMUNERATION POLICY ON RECRUITMENT OR PROMOTION Remuneration package on appointment The on-going remuneration package for a new Executive Director would be set in accordance with the terms of the Group’s shareholder- approved remuneration policy at the time of appointment and the maximum limits set out therein. Salaries may be set at a below-market level initially with a view to increasing them to the market rate, subject to individual performance and development in the role, by making phased above-inflation increases. Maximum opportunity under the incentive plans Currently, for an Executive Director, STIP payments will not exceed 150% of base salary and LTIP awards will not normally exceed 150% of base salary. This does not include any arrangements to replace forfeited entitlements. Where necessary, specific STIP and LTIP targets may be introduced for an individual for the first year of appointment if it is appropriate to do so to reflect the individual’s responsibilities and the point in the year at which they joined the Board. Payments beyond the remuneration policy The Committee retains flexibility to offer additional cash and/or share-based awards on appointment to take account of remuneration or benefit arrangements forfeited by an Executive Director on leaving a previous employer. If shares are used, such awards may be made under the terms of the LTIP or as permitted under the Listing Rules. Such payments would take into account the nature of awards forfeited and would reflect (as far as possible) performance conditions, attributed expected value and the time over which they would have vested or been paid. The Committee may agree that the Group will meet certain relocation, legal, tax equalisation and any other incidental expenses as appropriate, so as to enable the recruitment of the best people, including those who need to relocate. Travel and/or relocation allowances may be paid for the first 12 months of an appointment, with discretion to extend to a maximum of 24 months in exceptional circumstances.
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