GOVERNANCE REPORT
91
2019 EXECUTIVE DIRECTORS’ SHORT TERM INCENTIVE PLAN (AUDITED) Two-thirds of the 2019 bonus was based on corporate financial performance measures, split across four measures, and one-third based on personal non-financial performance measures. In line with our policy, one-third of the 2019 STIP award will be deferred into nil cost options (DSBP), subject to continued employment and clawback/malus provisions.
Estimated number of shares deferred under DSBP 1
Corporate performance (67%)
Personal performance (33%)
% achieved
Cash STIP
Deferred STIP £224,400
David Richardson
83.3% of maximum 82.5% of maximum
83% £455,600
338,768
1 The estimated number of shares deferred under the Deferred Share Bonus Plan (“DSBP”) were determined using the average closing share price between 1 October 2019 and 31 December 2019, being £0.6624. The actual number of shares will be updated in next year’s Directors’ Remuneration Report. The performance outcome against the targets set for the 2019 STIP was as follows: Corporate financial performance (67% of maximum) Weighting Threshold (25%) On-target (50%) Maximum (100%) Actual % achieved IFRS adjusted operating profit 12.5% £140m £175m £215m £219m 100% IFRS new business profit 12.5% £150m £180m £210m £182m 54% Cost base reduction 25% £24m £29m £34m £33.8m 98% Organic capital generation 50% (£79)m (£39)m £1m £36m 100% Total – – – – 63%/67% As explained earlier in the report, the Remuneration Committee exercised their discretion, reducing the financial performance outturn to 55.8%/67%. Strategic personal performance (33% of maximum) Strategic personal objective % achieved 27.5%/33% David Richardson Key achievements In respect of Deputy CEO and Interim Group CFO: • Complete debt and equity raise • Improve run rate on IFRS surplus assets • Completed the debt and equity raise in the market at a very challenging time • Led a number of changes in the investment portfolio to mitigate the impact of regulatory changes In respect of Interim Group CEO, Group CEO and Interim Group CFO: David has shown strong leadership in all areas, in particular:
• Developed a clear strategy and made strong initial progress towards a more sustainable capital model • Addressed (and continues to address) regulatory, market and economic challenges • Invested significant time in fostering strong relationships with external stakeholders • With colleagues, built his profile and relationships internally through regular townhalls, frequent and timely written communication. He actively sponsored the diversity and inclusivity programmes and updated the Group Board • A significant improvement in employee engagement scores during his 2019 tenure as CEO
• Adapt existing business model and de-risk to set the business on a path to achieve a sustainable capital model • Explore strategic business options to present to the Board • Build closer relationships with the regulators • Build greater investor support and market confidence through engagement and enhanced disclosures • People leadership: greater engagement with employees, promoting a more inclusive culture with a particular focus on gender and promoting Just behaviours through role modelling and communication
Risk consideration The Committee reviewed a comprehensive report from the Group Chief Risk Officer to ascertain that the Executive Directors’ objectives had been fulfilled within the risk appetite of the Group. In addition, the Committee received feedback from the Chief Risk Officer that there were no material issues to consider around regulatory breaches, customer outcomes or litigation that would prevent payment of any STIP award or trigger any malus. The Committee was satisfied that the STIP awards should be paid. VESTING OF LTIP AWARDS WITH A PERFORMANCE PERIOD ENDING IN 2019 (AUDITED) 2017 awards The 2017 LTIP award performance period ended on 31 December 2019. The award is forecast to vest at 50% on 17 May 2020 based on Earnings per share growth and relative TSR performance over the three year period ending 31 December 2019.
Value of shares due to vest 2
Number of shares awarded
Dividend equivalent due
Number of shares due to vest 1
Date of grant
Type of award
% vesting
David Richardson 17 May 2017 Nil-cost options
521,759 846,613
50%
£9,705
260,879 346,846
£172,806 £229,771
Rodney Cook
17 May 2017 Nil-cost options
50% £12,903.79
1 The number of shares due to vest for Rodney Cook takes into account the shares that lapsed on termination of employment. 2 The 2017 LTIP is due to vest on 17 May 2020. The value shown is based on the three month average share price to the year end, being £0.6624. This value will be trued up to reflect the actual share price at vesting in next year’s single total figure table.
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