Directors' report on remuneration (PDF 174 KB) - Inchcape

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BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION SELECTION OF LONG-TERM INCENTIVE PERFORMANCE MEASURES The Committee continues to believe that EPS is the best measure of long-term performance for the Group and should therefore remain the primary long-term incentive measure. It provides strong line of sight for executives, who are familiar with the existing basis of EPS performance measurement and is consistent with the Group’s long-term strategy focusing on sustainable growth. ROCE, combined with EPS, provides a balance between growth and returns. REMUNERATION POLICY FOR OTHER EMPLOYEES Our approach to salary reviews is consistent across the Group, with consideration given to the level of responsibility, experience, individual performance, salary levels in comparable companies and the Company’s ability to pay. Remuneration surveys are used, where appropriate, to establish market rates. Senior managers participate in an annual bonus scheme which has similar performance targets to those of the Executive Directors. Below this level, local incentive schemes are in place for management and non-management employees. Opportunities and performance conditions vary by organisational level with business unit specific metrics incorporated where appropriate. Commission based arrangements are also operated for certain roles. Senior managers (c.300 individuals) also receive normal PSP awards, while enhanced PSP awards and participation in the CIP is limited to Executive Directors, Executive Committee members and the next level of executives (c.30 individuals). Performance conditions are consistent for all participants, while award sizes vary by organisational level. Share ownership guidelines apply to Executive Directors. All UK employees are eligible to participate in the SAYE scheme on the same terms. Pension and benefits arrangements are tailored to local market conditions, and so various arrangements are in place for different populations within the Group. Executive Directors participate in the same scheme as other senior executives. CONSIDERATION OF CONDITIONS ELSEWHERE IN THE GROUP In 2013, the average salary increase across the Group was 2.84% compared to 2% for the Group Chief Executive and 4% for the Group Finance Director. Prior to the annual salary review, the Committee receives an update from the Group HR Director on the average salary increases across the Group. This is considered by the Committee when determining salary increases for the Executive Directors and the Executive Committee. The Company has a diverse international spread of business as well as a wide variety of roles from petrol pump attendants and valeters through to Managing Directors of our individual businesses and therefore pay levels and structures vary to reflect local market conditions. Although the Company has not carried out a formal employee consultation regarding Board remuneration, it does comply with local regulations and practices regarding employee consultation more broadly. CONSIDERATION OF SHAREHOLDER VIEWS When determining remuneration, the Committee takes into account the guidelines of investor bodies and shareholder views. In light of the high level of support for the 2011 Directors’ <strong>report</strong> on remuneration, the extensive consultation that was carried out in 2010/11 following the last remuneration review, and the fact that no changes to remuneration policy are being proposed for 2013, the Committee did not carry out a formal shareholder consultation exercise in 2012. However, the Committee is always open to feedback from shareholders on remuneration policy and arrangements, and commits to undergoing shareholder consultation in advance of any changes to remuneration policy. The votes received on the 2011 Directors’ <strong>report</strong> on remuneration are provided in the Implementation Report. RELATIVE IMPORTANCE OF SPEND ON PAY The table below shows the percentage change in profit after tax, dividends, and total employee compensation spend from the financial year ended 31 December 2010 to the financial year ended 31 December 2012. PROFIT AFTER TAX DIVIDEND TOTAL EMPLOYEE PAY EXPENDITURE 200 150 100 50 0 £133m 10 11 £148m £190m 12 200 150 100 50 0 £0m 10 11 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. Name Date of contract Notice period Unexpired term André Lacroix John McConnell 1 September 2005 1 October 2009 £47m £53m 12 800 600 400 200 0 £444m 10 12 months from Director or Company 12 months from Director or Company 11 £433m £443m 12 To retirement age To retirement age The Company may terminate the contract by paying the Executive Director a sum equal to his basic salary and, in certain circumstances, benefits including pension and life assurance, car and entitlement to holiday pay for the 12 month period. In the event that an Executive Director is not required to work their full notice period, the Company may also, in certain circumstances, exercise discretion to pay the Executive Director a proportion of the annual bonus that they would otherwise have received. The Non-Executive Directors receive a letter of appointment and are normally appointed for an initial three year period, subject to their re-appointment by shareholders at the AGM. No Non-Executive Director is engaged on a service contract with the Company. Name Ken Hanna (Chairman) Date of Appointment Expiry of current term 14 May 2009 14 May 2015 Vicky Bindra 1 July 2011 20 June 2014 Simon Borrows 1 October 2010 20 September 2013 Alison Cooper 1 July 2009 30 June 2015 Nigel Northridge 1 July 2009 30 June 2015 Will Samuel 26 January 2005 25 January 2014 Till Vestring 1 September 2011 31 August 2014 www.inchcape.com 53
Directors’ <strong>report</strong> on remuneration continued PERFORMANCE SCENARIOS The charts below show the remuneration that Executive Directors could be expected to obtain based on varying performance scenarios. In order to achieve maximum vesting of all incentives, as illustrated in the ‘maximum’ scenario below, the Executive Directors would need to deliver EPS growth in excess of 20% p.a. over the next three years. Illustrations are intended to provide further information to shareholders regarding the pay for performance relationship. However, actual pay delivered will be influenced by changes in share price and the vesting period of awards. GROUP CHIEF EXECUTIVE 5000 4,820 9% 26% GROUP FINANCE DIRECTOR 3000 Total remuneration (£000s) 4000 3000 2000 1000 1,152 30% 70% 2,149 14% 9% 23% 16% 38% 17% 25% 7% 17% Total remuneration (£000s) 2400 1800 1200 600 565 25% 75% 1,060 13% 10% 24% 13% 40% 17% 2,266 5% 23% 19% 28% 6% 19% 43% 0 Fixed On-plan Maximum 0 Fixed On-plan Maximum Key: Enhanced PSP Normal PSP CIP Bonus Pension & bens Salary Key: Enhanced PSP Normal PSP CIP Bonus Pension & bens Salary Base salary Annual base salary: £810k Pension 40% of salary Benefits Taxable value of annual benefits provided: £18k Annual Bonus CIP Normal PSP Enhanced PSP No incentives included No incentives included No incentives included No incentives included 60% of salary 150% of salary 25% of salary i.e. 50% of salary invested matched 2:1 vesting 25% at threshold £308k i.e. 304.170 shares at £4.05, vesting 25% at threshold £0k No vesting – rewards superior performance only 100% of salary i.e. 50% of salary invested matched 2:1 vesting 100% at max £1,232k i.e. 304.170 shares at £4.05, vesting 100% at max £411k i.e. 101.390 shares at £4.05, vesting 100% at max Base salary Annual base salary: £426k Pension 30% of salary Benefits Taxable value of annual benefits provided: £6k Annual Bonus CIP Normal PSP Enhanced PSP No incentives included No incentives included No incentives included No incentives included 60% of salary 150% of salary 25% of salary i.e. 50% of salary invested matched 2:1 vesting 25% at threshold £132k i.e. 130.760 shares at £4.05, vesting 25% at threshold £0k No vesting – rewards superior performance only 100% of salary i.e. 50% of salary invested matched 2:1 vesting 100% at max £530k i.e. 130.760 shares at £4.05, vesting 100% at max £106k i.e. 26.150 shares at £4.05, vesting 100% at max Potential reward opportunities illustrated above are based on the policy which will apply in the forthcoming financial year, applied to the base salary effective 1 April 2013. For the annual bonus, the amounts illustrated are those potentially receivable in respect of performance for 2013. For the CIP, the award opportunities assume full voluntary investment in Inchcape shares. It should be noted that any awards granted under the CIP and PSP in a year do not normally vest until the third anniversary of the date of grant. The projected value of CIP and PSP amounts excludes the impact of share price growth and dividend accrual. PSP values are based on the average share price from 1 October 2012 to 31 December 2012 of £4.05. 54 Inchcape plc Annual Report and Accounts 2012
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Directors' report on remuneration (PDF 174 KB) - Inchcape

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