Annual Report for the year ended 31 December 2008

in determining Directors’ remuneration, the Committee considers
returns to shareholders as measured by profit and earnings performance
both in absolute terms and against budget. The quality of profit
performance is also considered in the context of market conditions and
whether it is broadly based across all divisions or derived more narrowly.
Other considerations are comparable market remuneration data, the
experience and performance of individual Directors, their areas of
responsibility and remuneration levels throughout the Group.
A high proportion of potential total remuneration is related to
performance designed to motivate Executive Directors to enhance the
value of the Group. As indicated in last year’s report these arrangements
have been reviewed during 2008 and in light of the FsA’s recent
guidance on remuneration published in October 2008. it is the view of
the Committee that appropriate and sufficient risk and control measures
are currently in place and are supported by our approach to reward.
Medium and long-term incentives are delivered in the form of Evolution
Group options and share awards.
The Committee intends that the broad tenets of remuneration policy will
continue to support the objectives of the Group but will keep it under
review and will strive to balance the views of major shareholders and the
needs of the Group. in particular, the Committee recognises the need to
ensure that the most senior executives who lead the success of the
Group must be incentivised and retained in challenging market
conditions.
The components of remuneration
Overview
The remuneration packages of Executive Directors currently comprise
three elements: basic salary and benefits in kind, annual discretionary
performance related bonus, and medium to long-term incentive plans.
As indicated above, the Board has conducted a review of the remuneration
and reward structure across the Group including that of Executive
Directors to ensure the FsA guidance on remuneration published in
October 2008 is carefully considered in setting remuneration strategy
for the Group. The current structure is geared towards meeting the
needs of the Group in the medium-term, in order to continue to be able
to recruit, reward and motivate staff at all levels to maximise the
earnings potential of the Group and to further align the interests of
Directors and senior staff with those of our shareholders.
1. Fixed remuneration - basic salary and benefits
The fixed component of Executive Directors’ remuneration comprises
basic salary and benefits in kind. A salary cap was implemented in 2002
for all employees throughout the Group of £100,000, which remained
in place throughout 2008. We will keep the salary cap under review,
mindful of the FsA’s commentary around the risk profile that this may
encourage. At this time, the Group continue to believe that this cap
provides invaluable support to its subsidiaries to enable them to
effectively manage their fixed cost base. This supports a performance
culture based on medium term equity participation that is aligned with
shareholders’ interests. We are confident that this approach does not
undermine our compliance and risk priorities.
direcTors' remuneraTion reporT CONTiNuED
for The year ended 31 december
32 THE EvOluTiON GROup plC ANNuAl REpORT & ACCOuNTs 2008
At the year end 21% (2007: 18%) of employees were paid the salary
cap of £100,000. The average salary for all employees was £55,674
(2007: £55,808). The following benefits in kind are provided to
Executive Directors: medical cover; life assurance; critical illness and
permanent health insurance; and a car allowance. No pension provision
is provided by the Group save for a salary sacrifice pension scheme
where the Company contributes the National insurance costs it would
otherwise have saved. No Director has joined this scheme.
Based on information provided by our retained remuneration consultants
the basic salary of £100,000, together with the benefits in kind,
continues to represent one of the lowest levels of fixed remuneration
in comparable companies, particularly given the absence of a pension
provision. This accords with the Group’s overall philosophy of
remuneration having as low an element of fixed or non-performance
related pay as possible.
2. Performance-related remuneration
As part of the remuneration and reward review, changes have recently
been and will continue to be developed in respect of the remuneration
and reward structure for Executive Directors. in particular the remuneration
and reward package for the Chief Executive Officer will no longer directly
reflect the scheme for employees of Esl.
The calculation of Executive Director bonuses will, subject to the discretion
of the Committee, reflect performance measured against each Director’s
quantitative performance criteria including profit performance and return
on capital employed as well as other quantitative and qualitative performance
measures including, where relevant, assets under management, income
diversification, integration of new assets and where appropriate, the
share price performance of the Group. in respect of 2008, the Executive
Directors received performance related bonuses in recognition of their
achievement of various strategic and qualitative objectives throughout
the year. The awards also reflect the relative strength of the share price
performance of the Group and the continued loyalty to the Group shown
by Executive Directors during a period where they enjoyed limited or no
medium to long-term retention benefits.
in recognition of the need to further align the interests of Directors
with those of shareholders and recognising guidelines issued by the
FsA, a three year deferral element of 25% has been introduced on
Executive Director bonuses for 2008, to ensure a material element is
linked to future performance. The deferral will be by way of the grant
of conditional share awards under the Evolution Group plC Executive
share incentive plan 2002, subject to the achievement of qualitative
performance conditions set at the start of each year and continuing
to operate within the risk and compliance framework of the Group.
These changes to the remuneration strategy reflect the strategic
direction of the Group and are a response to regulatory concerns that
the strategy does not encourage excessive risk taking.