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

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BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION PERFORMANCE SHARE PLAN AWARDS MADE DURING THE YEAR The performance share plan (PSP) was approved by shareholders at the 2011 AGM, and awards of normal and enhanced awards were made to Executive Directors and other senior executives under this plan in 2011 and 2012. Awards in 2011 were based on a percentage of salary, but were then fixed as a number of shares for 2012. The Committee feels that fixing the award sizes as a number of shares provides strong alignment with shareholders, as the face value of awards will fall if the share price falls and vice versa. Awards made in 2012 to Executive Directors are summarised below: Type of award ‘Normal’ performance shares ‘Enhanced’ performance shares Basis of award Absolute number of shares calculated on the basis of shares granted in 2011 Face value of awards made during 2012* Group Chief Executive: £1,077,674 (304,170 shares) Group Finance Director: £463,283 (130,760 shares) Group Chief Executive: £359,225 (101,390 shares) Group Finance Director: £92,649 (26,150 shares) Performance period 3 years (i.e. 1 January 2012 – 31 December 2014) Performance conditions 75% on EPS growth 100% on EPS growth 25% on average ROCE % vesting at threshold 25% of award 0% of award * Calculated using the share price of £3.543 which was the closing price on date of grant 10 April 2012. Performance conditions are as follows: NORMAL AWARDS 3 year EPS growth p.a. Vesting Percentage Less than 7% 0% 7% 25% 15% 100% Between 7% and 15% Straight line basis 3 year average ROCE Vesting Percentage Less than 18% 0% 18% 25% 21% 100% Between 18% and 21% Straight line basis ENHANCED AWARDS 3 year EPS growth p.a. Vesting Percentage Less than 15% 0% 20% 100% Between 15% and 20% Straight line basis Targets were set taking into account a range of reference points including the Group’s strategic plan and broker forecasts for both the Group and other sector peers. The Committee believes that these targets are very stretching, and that the maximum will only be available for truly outstanding performance. AWARDS VESTING DURING THE YEAR No award under the PSP is due to vest for Executive Directors until 2014 (subject to performance). CO-INVESTMENT PLAN AWARDS MADE DURING THE YEAR The renewal of the Co-investment plan (CIP) was approved by shareholders in 2011. During 2012, both Executive Directors made investments, and therefore were granted matching awards as detailed below: Type of award Basis of award Face value of awards made during 2012* Matching award 2:1 match on invested amounts Group Chief Executive: £398,357(117,164 shares) Group Finance Director: £408,051 (120,015 shares) Performance period 3 years (i.e. 1 January 2012 – 31 December 2014) Performance conditions 75% on EPS growth 25% on average ROCE % vesting at threshold 25% of award * Calculated using the share price of £3.40 which was the closing price on date of grant 22 June 2012. For simplicity and alignment, the performance targets for the CIP awards are the same as the normal PSP award made in 2012. AWARDS VESTING DURING THE YEAR No award under the CIP is due to vest for either individual until 2014 (subject to performance). www.inchcape.com 57
Directors’ <strong>report</strong> on remuneration continued Executive share options Awards vesting during the year The final grant of share options under this scheme was made in 2010. The grant level for these options was half the normal level to reflect the fall in the Group’s share price at that time as well as the strategy to reduce operating costs. These options vest on three year EPS growth as follows: EPS growth p.a. Vesting Percentage Less than RPI+3% 0% RPI+3% 25% RPI+8% 100% Between RPI+3% and RPI+8% Straight line basis There will be no retesting. These options will vest in full based on performance to 31 December 2012. Details of awards vesting to Executive Directors are shown in the table below. Options held Exercise price André Lacroix 243,870 £3.10 1 Jan 2010 – 31 Dec 2012 John McConnell 125,806 £3.10 1 Jan 2010 – 31 Dec 2012 1. Based on 2012 EPS of 39.7p, 2009 EPS of 27.1p, and RPI growth of 4.22%. 2. Based on the average share price from 1 October 2012 – 31 December 2012. Executive share ownership As at 31 December 2012, the Directors held the following shares: Shares held Performance period Vesting date EPS growth p.a. 1 % vesting Share price at vesting 2 Value (£000) 8 April 2013 RPI+9.35% 100% £4.05 232 8 April 2013 RPI+9.35% 100% £4.05 120 Guideline met Nil cost awards Subject to performance conditions Subject to deferral Options held Subject to performance conditions Vested but not yet exercised André Lacroix 536,148 Y 1,123,607 N 243,870 961,467 John McConnell 210,676 Y 537,076 N 125,806 337,465 Details of the shares held by the Non-Executive Directors are given on page 62. The Executive Directors are required to hold a fixed number of shares equivalent to 200% of base salary. The share price as at 31 December 2012 was 430.9p. Dilution limits Options granted under the executive share option scheme, the SAYE scheme and awards granted under the performance share plan are met by the issue of new shares or treasury shares. All other plans are satisfied on exercise by market purchase shares. Dilution limits are monitored throughout the year by the Remuneration Committee and the Company complies with the limits set by the Association of British Insurers. Issued share capital as at 31 December 2012 468m All schemes – 10% over 10 year rolling period 46.8m Remaining headroom for all schemes 18.7m Executive schemes – 5% over a 10 year rolling period 23.4m Remaining headroom for executive schemes 2.4m Shareholder context The table below shows the advisory vote on the 2011 Directors’ <strong>report</strong> on remuneration at the 2012 AGM. It is the policy of the Committee to consult with major shareholders prior to any major changes to the Remuneration Policy. Exit payments made in year There were no exit payments made in 2012. Total shareholder returns (TSR) The following graph illustrates the Group’s TSR over a five year period, relative to the performance of the total return index of the FTSE mid-250 group of companies (excluding investment trusts). TSR is essentially share price growth plus re-invested dividends. The FTSE mid-250 has been chosen as the most suitable comparator group as it is the general market index in which the Company appears. HISTORICAL TSR PERFORMANCE 200 150 100 50 0 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 For Against Abstentions* Votes 91.72% 4.46% 3.82% * Abstain votes are not included in the final proxy figures as they are not recognised as a vote in law. The figures above are for illustration purposes, consistent with what is required under the BIS recommendations. Inchcape FTSE mid 250 excluding investment trust 58 Inchcape plc Annual Report and Accounts 2012
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Directors' report on remuneration (PDF 174 KB) - Inchcape

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