GOVERNANCE REPORT
89
Consideration of employment conditions when setting executive pay The Committee seeks to ensure that the underlying principles, which form the basis for decisions on Executive Directors’ pay, are consistent with those on which pay decisions for the rest of the workforce are taken. For example, the Committee takes into account the general salary increases for the broader employee population when conducting the salary review for the Executive Directors. However, there are some structural differences in the Executive Directors’ Remuneration Policy compared to that for the broader employee base, which the Committee believes are necessary to reflect the differing levels of seniority and responsibility. A greater weight is placed on performance-based pay through the quantum and participation levels in incentive schemes. This ensures the remuneration of the Executive Directors is aligned with the performance of the Group and therefore the interests of shareholders. For 2019, the corporate STIP scheme was changed to a balanced scorecard, whereby the achievement of financial measures, which were then moderated by the achievement of non-financial (strategic) measures created the “bonus pool” and this was distributed against the assessment of performance for individual employees. The purpose of this change was to ensure variable reward across the business was aligned to affordability, strategic business priorities and individual performance. The alignment of reward to performance was one of the topics discussed with Steve Melcher at his employee engagement events. Shareholder views The Group values and is committed to dialogue with its shareholders. The Committee will consider investor feedback and the voting results received in relation to relevant AGM resolutions each year. In addition, the Committee will engage proactively with shareholders, and will ensure that shareholders are consulted in advance where any material changes to the Directors’ Remuneration Policy are proposed. The Committee is also kept well informed of the relevant guidelines and publications of institutional investors, their representative bodies and prominent proxy agencies, so understands developments in the views across the wider investor community. ANNUAL REPORT ON REMUNERATION This report describes the details of the remuneration policy for our Executive Directors and Non-Executive Directors and sets out how this Policy has been used and, accordingly, the amounts paid relating to the year ended 31 December 2019. The report has been prepared in accordance with the provisions of the Companies Act 2006, the FCA’s Listing Rules and The Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended. The report has also been prepared in line with the recommendations of the UK Corporate Governance Code. Various disclosures of the detailed information about the Directors’ remuneration set out below have been audited by the Group’s independent auditor, KPMG LLP.
FACTORS CONSIDERED AS PART OF THE POLICY REVIEW As part of the review process the Committee considered a number of different factors, including maintaining a link with the broader remuneration framework to ensure consistency and common practice across the Group, and in determining the overall levels of remuneration of the Executive Directors, the Committee also pays due regard to pay and conditions elsewhere in the organisation. In particular, the Committee takes an active role in approving the remuneration of senior executives, which covers six roles in addition to the Executive Directors across the Group. The Committee also dedicates time, through a standing agenda item, to consider wider workforce pay policies and pay structures throughout the Group and this includes consideration of the number of incentive plans in operation, pension provisions across the Group and the annual pay review process. As set out in the new UK Corporate Governance Code, the proposed Policy has been viewed in the context of six factors: • Clarity – the proposed Policy has a clear objective; to enable the Group to recruit, retain and motivate high-calibre individuals to deliver long-term sustainable performance which benefits all stakeholders. The Policy itself is in line with standard UK market practice, and represents an evolution of the current Policy, so should be well understood by participants and shareholders • Simplicity – the Policy includes a standard annual bonus plan and a single LTIP, so the incentive arrangements are considered easy to communicate. Payments are made either in cash or via Just Group shares. No artificial or complex structures are used to facilitate the operation of the incentive plans. The rationale for each element of the Policy is clearly explained in the Policy table and links to the overall Company strategy • Risk – relevant individual and plan limits prevent excessive outcomes under the annual bonus or LTIP. Regular interaction with the Chief Risk Officer ensures relevant risk implications are understood when setting or assessing performance targets. Comprehensive clawback and malus provisions are in place across all incentive plans and the Committee’s ability to use its discretion to override formulaic outcomes are considered important controls to prevent inappropriate reward outcomes • Predictability – the possible reward outcomes are quantified and reviewed at the outset of the performance period. The “Illustration of 2020 Remuneration Policy” (page 88), clearly shows the potential scenarios of performance and the resulting pay outcomes which could be expected • Proportionality – incentives only pay out if strong performance has been delivered by the Executive Directors. The performance measures used have a direct link to the KPIs of the business and there is a clear separation between those used in the annual bonus and the LTIP. The Committee has the discretion to override formulaic outcomes if they are deemed inappropriate in light of the wider performance of the Company and considering the experience of stakeholders • Alignment to culture – incentive structures incentivise and reward for strong performance in accordance with the Company’s expected behaviours and values; they do not reward for poor performance. The Policy seeks to retain Executive Directors to deliver long-term, sustainable performance which benefits all stakeholders
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