Full Annual Report - Inchcape

Governance
Remuneration report continued
The plan has been extended to certain other senior executives
below Board level.
The shares acquired will be matched at the end of the three year
vesting period. The match will be determined by performance
against the cumulative Economic Profit target.
For 2008 awards will vest according to the following sliding scale:
EP growth over three years
Matching shares
Less than RPI+3% 0
RPI+3% 1:1
RPI+12% 2:1
Between RPI+3% and RPI+12%
Straight line basis
The Remuneration Committee decided to suspend the coinvestment
plan during 2009. This decision was taken since the plan
is designed to stretch performance and due to the downturn in the
second half of 2008 and 2009, it was improbable that there would
be any matching element.
The Remuneration Committee has also decided to suspend the coinvestment
plan for 2010. The Remuneration Committee noted the
concerns of shareholders in respect of lower share prices creating
the opportunity for windfall gains. Therefore this decision has been
taken since the existing performance conditions would not be
stretching enough when viewed in context of the recovery phase
of the business.
Deferred bonus plan
The deferred bonus plan was a voluntary plan for Executive Directors
and certain other senior executives. Final awards under this plan
were made in 2007. Details of these awards are shown on page 73.
Participants in the plan were able to invest a minimum of 10% and
maximum of 75% post tax annual bonus to acquire ordinary shares
in the Company. The shares are then matched on a 1:1 basis at the
end of a three year vesting period. For Executive Directors there is a
performance condition attached to the vesting of the award shares
of EPS growth of RPI+3% per annum with no retesting. This
performance target was not achieved for the awards granted in
2007, therefore the award will lapse in full.
Save as you earn (SAYE)
Executive Directors are eligible to participate in the Company’s SAYE
scheme on the same terms as other employees. Participants make
monthly savings, to a maximum of £250 per month, over a three
year period. At the end of the savings period the funds are used to
purchase shares under option. The acquisition of shares under this
scheme is not subject to the satisfaction of a performance target.
Executive share ownership
To emphasise the importance the Remuneration Committee places
on executive share ownership, Executive Directors are required to
hold a fixed number of shares equivalent to 200% of base salary.
Each Executive Director has five years from 2007, or date of
appointment (if later), to reach this shareholding target. As at
31 December 2009, André Lacroix and John McConnell held 181%
and 110% respectively of base salary in shares.
Retirement benefits
The Inchcape Group (UK) Pension Scheme (UK Scheme) provides
benefits for Executive Directors and certain senior executives at
normal retirement age of 65, equal to a maximum of two thirds
of final base salary, where salary has scheme specific ceiling of
£123,600 in the 2009/10 tax year, subject to completion of between
20 and 40 years’ service. Pensions in payments are guaranteed to
increase in line with the lesser of 5% and the increase in the RPI.
The UK Scheme requires members who join after March 2005 to
contribute 7% of base salary up to the scheme specific ceiling of
£123,600 in the 2009/10 tax year.
Executive Directors, whose base salary is higher than £123,600,
are paid a monthly cash supplement to enable them to make
additional pension arrangements. Barbara Richmond and John
McConnell received such supplements in 2009. Details of the
amounts paid are shown on page 71. André Lacroix received
a cash supplement of 40% of his base salary in lieu of a formal
pension provision. He is not a member of the UK Scheme except
in respect of the life assurance benefit for death in service.
A lump sum life assurance benefit of four times full base salary
is provided on death in service. For pension scheme members,
a spouse’s pension of either half or two thirds of the prospective
member’s pension may also be payable. Children’s pensions
may also be payable, up to half of the member’s pension.
Taxable and other benefits
These include items such as Company cars, medical care and
life assurance premiums. These benefits are in line with the
remuneration policy framework outlined in this report. These benefits
are non-pensionable.
Total Shareholder Return (TSR)
The TSR graph is shown in the investor relations section of the
Corporate Governance report on page 63.
Service contracts
The Company’s policy is for Executive Directors’ service contract
notice periods to be no longer than 12 months, except in
exceptional circumstances. All current contracts contain notice
periods of 12 months. In the event of termination the Company will
seek fair mitigation of contractual rights. Within legal constraints, the
Remuneration Committee tailors its approach, in the event of early
termination, to the circumstances of each individual case.
Non-Executive Directors are appointed for an initial period of
three years, which may be extended by agreement with the Board.
No Non-Executive Director is engaged on a service contract with
the Company.
Name Date of contract Notice period Unexpired term
André
Lacroix
John
McConnell
By order of the Board
01 September 05 12 months from the
Director;
12 months from the
Company
To normal
retirement age
01 October 09 12 months from the
Director;
12 months from the
Company
To normal
retirement age
Michael Wemms
Chairman of the Remuneration Committee
9 March 2010
70
Inchcape plc ¦ Annual Report and Accounts 2009